Bloomberg Government - OUTLOOK 2017 - ACA Repeal Dominates Health Policy Predictions (12.29.16)

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OUTLOOK 2017: ACA Repeal Dominates Health Policy

Predictions
December 29, 2016 4:25PM ET
Repealing, replacing Affordable Care Act tops Republican agenda for 2017
Other key issues include potential changes to Medicare, Medicaid
By Sara Hansard, Victoria Pelham, Alex Ruoff, James Swann, Eric Topor,Michael D. Williamson, and
Mindy Yochelson
(BNA) -- Republicans, wanting to fulfill campaign promises, will seek to quickly pass a law to repeal
the Affordable Care Act in 2017, attorneys and health-care trade group executives tell Bloomberg
BNA. However, as part of the repeal bill or in separate legislation, lawmakers are likely to delay the
date on which ACA repeal takes effect.
The transition from President Barack Obama to President-elect Donald Trump on Jan. 20 will kick off
major policy reversals for the Department of Health and Human Services and the Centers for Medicare
and Medicaid Services, industry observers say.
Trump's HHS secretary pick of Rep. Tom Price (R-Ga.), who as a lawmaker advocated for repeal of
Obama's signature health law, and CMS administrator pick of Seema Verma, an adviser for
Republicans in Indiana, likely signal major changes ahead for the health insurance industry.
With Republicans controlling both the House and Senate and endorsements from key leaders like
Senate Majority Leader Mitch McConnell (R-Ky.), Price and Verma are expected to be confirmed.
In addition to reworking or scrapping the ACA, industry sources expect Republicans to make good on
their long-running promises to alter the Medicare program.
Delaying the ACA repeal would allow Congress some time to develop its replacement for the healthcoverage law, sources said. Trump is likely to act quickly to approve legislation altering the ACA.
Congress would then spend a great deal of time working on a replacement bill, Len Marquez, director
for government relations with the Association of American Medical Colleges (AAMC), an industry
group for teaching hospitals headquartered in Washington, told Bloomberg BNA. Marquez is the
AAMC's director of government relations.
However, repealing the ACA without simultaneously replacing it could throw the health-care industry
into chaos, Beth Feldpush, the senior vice president of policy and advocacy at America's Essential
Hospitals (AEH), said. The AEH is a Washington-based industry group for safety-net hospitals.
If policymakers move forward with a repeal plan, the AEH strongly urges them to replace the law at the
same time to cut back on uncertainty, Feldpush told Bloomberg BNA.
2016 Bloomberg Finance L.P. All Rights Reserved
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Health Insurer Concerns

Topping health insurers list of concerns is what will happen to the individual market if Congress
repeals the ACA's mandate that individuals have health coverage, leaving insurers with the
requirement to sell plans to people with pre-existing conditions without charging them higher
premiums.
That could well lead to many people waiting until they're sick to buy coverage and dropping coverage
after receiving treatment. That would likely result in higher costs, higher premiums and a declining
individual market composed only of people with health problems or enough cash to buy high-priced
policies, sources told Bloomberg BNA.
If major provisions of the ACA are repealed, We might see transformational change to health
insurance in the United States for the second time in recent years, Daniel Hemel, assistant professor
of law at the University of Chicago Law School, told Bloomberg BNA.
A budget bill, H.R. 3762, passed by the House and Senate in late 2015 and vetoed by President
Barack Obama in January, is likely to serve as the template followed by Republicans, Hemel, who
supports the ACA, said.
Under that legislation, ACA penalties for not having qualified individual coverage or for employers not
providing minimum essential coverage would be repealed, while the guaranteed issue and community
rating requirements that health insurers offer coverage to everyone without charging more for preexisting conditions remained.
If that happens, You're going to see a market with severe adverse selection, Hemel said. I'm not sure
whether severe adverse selection means a much smaller market or no market at all.
Adverse selection happens when sicker people buy health insurance while healthier people don't buy
it, leading to high claim costs and spiraling premiums. It can result in insurers becoming unprofitable
and going out of business.
Uncertain 2017 Exchanges
A major challenge will be creating a stable exchange environment for health insurers in 2017, Manatt
Health Managing Director Joel Ario told Bloomberg BNA.
Even before all the current uncertainty, the markets needed changes for them to feel comfortable
participating, he said.
Most marketplace plans have lost money in the exchanges, and major insurers such as UnitedHealth
Group Inc., Aetna Inc. and Humana Inc. are scaling back their involvement in the exchanges in 2017
due to heavy losses.
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The uncertainty that comes with an ACA repeal strategy, undefined transition and undefined
replacementthat is not good for business for insurers, Sabrina Corlette, research professor at
Georgetown University's Center on Health Insurance Reforms, told Bloomberg BNA.
Insurers will either leave, or if they stay they'll have to raise prices, Corlette said. On a longer-term
basis they're going to be looking at Republican replacement plans that affect the employer business,
such as capping the tax exclusion on employer-sponsored health insurance, which would make it less
attractive for employers to offer coverage, she said.
AHIP's Recommendations
Continuous coverage is needed to keep healthy people in the insurance market, America's Health
Insurance Plans (AHIP) said in a release issued in early December.
AHIP called for Congress to fund reinsurance payments through at least Jan. 1, 2019, which would
extend the program for two years. The payments, which protect insurers from very high claims, totaled
$7.7 billion for 2015, but some congressional Republicans argue that the Obama administration
violated the ACA by not making payments of $3.5 billion to the U.S. Treasury from the reinsurance
fund.
Implementing effective pre-enrollment verification to ensure that people who sign up for coverage
during special enrollment periods are eligible and preventing Medicaid-eligible people from being
inappropriately steered into the commercial insurance market were also on AHIP's list of
recommendations to help ensure stability for 2017.
AHIP also wants the timelines that health plans must meet to file rates for the 2018 federal exchange to
be extended into the summer from May 2017. Uncertainty in early 2017 may discourage plans from
submitting bids for 2018, the trade group said.
Health insurers have also called for changes in the ACA risk adjustment program to protect insurers
who cover sicker populations. Many small, new plans have had to make large payments to established
health insurers under the program.
Continuous Coverage Questions
Even though an ACA repeal bill will likely include provisions to delay the effective date, there are
questions about how replacement proposals that include continuous coverage would be implemented,
Cori Uccello, senior health fellow with the American Academy of Actuaries, told Bloomberg BNA.
It's difficult to see how they could implement them in conjunction with the repeal without a full replace
plan, Uccello said, referring to replacement provisions such as continuous coverage. Senate
Republicans will need to get some Democratic support for a replacement plan in order to avoid a
filibuster.
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Coverage mandates and subsidies to buy policies as well as Medicaid support to states are huge
elements of support for a functioning marketplace, Chris Jennings, founder and president of healthcare consulting firm Jennings Policy Strategies, told Bloomberg BNA. Jennings was deputy assistant
to the president for health policy and coordinator for health reform under Obama, and he served in a
similar capacity under President Bill Clinton, as well as advising Hillary Clinton on health care during
her presidential campaign.
Republican plans to repeal major provisions of the ACA through a budget reconciliation bill would
eliminate those provisions.
You shouldn't break it before you fix it, Jennings said of the ACA. They're going to break it and then
try to figure out how to fix it. That makes your job a lot harder.
Current ACA Market in Meltdown
However, the current ACA market in many areas is in meltdown, Joel White, president of the Council
for Affordable Health Coverage (CAHC), told Bloomberg BNA. I don't see how the risk pool could get
any worse than it is today.
The CAHC's 25 members include employers with large group plans, health insurers, health-care
providers and patient groups.
Exchange plans have ended up covering a sicker population than originally expected, and in 2017
premiums for benchmark plans on which federal subsidies are based are rising an average of 22
percent before subsidies are taken into account, the HHS reported.
High-Risk Pools
Republicans should try to try to set up high-risk pools in 2017, White said. High-risk pools, which
House Speaker Paul Ryan (R-Wis.) endorsed in his Better Way proposal for health-care reforms,
could cover people with high medical needs, leaving a healthier population in the individual market, he
said.
High-risk pools existed in 35 states, but they were mostly shut down after the ACA was enacted. The
risk stabilization programs in the ACA are expensive and under-funded, White said. The high-risk
pools are a more targeted, more specific, smart approach to covering high-risk people, he said.
White also endorsed a Republican proposal to allow people to use subsidies to buy plans outside of
the exchanges beginning in 2018.
That would create more competition and stability in the individual market, White said. Moreover, the
off-exchange markets are more stable than the on-exchange markets.
Cost-Sharing Subsidies
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The possible loss of $9 billion in cost-sharing reductions for low-income people buying Obamacare
plans is a major issue that needs to be resolved for health insurers in 2017.
The cost-sharing reductions are available to households with incomes between 100 percent and 250
percent of the federal poverty level to help pay out-of-pocket costs, such as copayments and
deductibles. As of March nearly 6.4 million ACA exchange enrollees were covered by plans that
included the cost-sharing subsidies, out of a total of more than 11 million exchange enrollees.
Unless Congress quickly appropriates new funding for this, they're in trouble, Josh Blackman,
associate professor at South Texas College of Law Houston, told Bloomberg BNA. It's the most
pressing issue right away.
Health insurers are required under the ACA to provide the subsidies. If Trump takes the position that
the cost-sharing reductions are illegal, insurers would still be left with the requirement to provide them,
Blackman, who is a critic of the ACA, said.
In May the U.S. District Court for the District of Columbia blocked the federal government from
continuing to reimburse health insurers for the ACA's cost-sharing reductions, siding with House
Republicans in U.S. House of Representatives v. Burwell, 2016 BL 151586, D.D.C., No. 14-cv-1967,
5/12/16. House Republicans argued the payments were illegal because they weren't appropriated by
Congress.
The Obama administration has appealed the district court decision, and the U.S. Court of Appeals for
the District of Columbia Circuit delayed the case until February, after President-elect Donald Trump
takes office.
More Consumer Choice
The law that may eventually replace the ACA could help create a more transparent and consumerfriendly health-care system, Rita Numerof, the co-founder and president of Numerof Consulting in St.
Louis, told Bloomberg BNA.
I think we have a second chance to get health care right, Numerof said.
Passage of the ACA was largely energized by frustration over increasing insurance premiums and
restricted access that prevented many people with pre-existing conditions from receiving coverage.
Thus, more regulation of the insurance industry sounded like a good idea at the time, she said.
However, many didn't pay close enough attention to the original bill before it was passed, according to
Numerof. A replacement to the ACA should focus on increasing access and affordability and the best
way to accomplish that is through expanding consumer choice, she said. The idea of constraining
coverage to a particular state or region doesn't make sense.
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These sort of restrictions, which weren't eliminated in the ACA, fueled provider consolidation in the last
few years, Numerof said. A consolidated market drives up prices for insurers and ultimately,
consumers.
Medicaid in 2017
The new year will be a defining one for the more-than-50-year-old Medicaid program, as critical
discussions occur over the future of the program's funding streams and role. Whether that translates
into direct changes in 2017, though, remains to be seen, health-care analysts told Bloomberg BNA.
The $550 billion program has come into sharp focus in the wake of the election of Trumpwho has
strongly backed repeal of the Affordable Care Act, which added more than 11 million people to
Medicaid's rollsand of Trump's nominations for health-care agency positions. As a result, many key
questions cloud Medicaid policy.
Dismantling the ACA could throw coverage in limbo for beneficiaries who gained Medicaid coverage
under the ACA, which raised income thresholds to 138 percent of the federal poverty level in the 31
states that agreed to expansion.
Alongside these potential changes, a Republican chorus of proposals is pushing entitlement program
changes that could either convert federal Medicaid dollars into a block-grant form or establish a percapita cap that would place limits on federal spending (either wholesale or by enrollee) while giving
states more freedom to determine how to use the funds. Patient advocates, however, fear these
proposals will drive program spending down, leading to benefit cuts and lost coverage.
It's potentially the most consequential year we've had in Medicaid since Medicaid was enacted, Sara
Rosenbaum, a health-law professor with the George Washington University School of Public Health
and Health Services, told Bloomberg BNA. Rosenbaum also serves as chairwoman of the Medicaid
and CHIP Payment and Access Commission.
Diane Rowland, executive vice president of the Kaiser Family Foundation, told Bloomberg BNA there
have been many other significant years in the course of Medicaid's history, but the difference is the
public health insurance program now covers around 70 million people.
The size and scope of the program means that any changes to it are likely to affect millions of people,
she said.
Flexibility or Retrenchment?
In 2017, Medicaid will be under deep scrutiny, while a foundational conversation about its coverage
which has largely moved away from temporary, stopgap forms of the pastwill ensue.
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Health care and public insurance have seen many changes that weren't envisioned 50 years ago,
Medicaid Health Plans of America President and CEO Jeff Myers told Bloomberg BNA. Medicaid
needs to be updated, and I think now's the time to do it.
He said the program is cyclical and dependent on states economies, so he believes the federal
government should implement a variety of shock absorbers as a backstop to keep the financing
stable.
Rosenbaum said a Trump administration might overrule some of the many Medicaid rules issued over
the past five to six years or revisit rules that are perceived by the incoming administration as too
burdensome.
House Freedom Caucus Chair Rep. Mark Meadows (R-N.C.) targeted several Medicaid and
Children's Health Insurance Program regulations in a recently released roundup of rules and executive
orders conservatives are looking to eliminate in the first 100 days of a Trump presidency.
Others pointed to a rethinking of so-called 1115 demonstration waivers, intended to pilot new models
of Medicaid coverage and delivery, as an immediate priority for easing the federal grip in 2017. The
idea of state flexibility has become a rallying cry for the next administration, changes which will likely
be thought out next year and carried out over the following few years.
The Obama administration has been wary of imposing additional eligibility restrictions in these
waivers, such as when it rejected work requirements for Medicaid enrollees in Ohio and New
Hampshire.
However, the year ahead might see more state requests, more federal leniency and more approvals for
state waivers. This is especially true given Verma's nomination to head the CMS, considering her work
on a unique Medicaid waiver in Indiana that included cost-sharing elements.
Feldpush, with America's Essential Hospitals, said CMS approvals for state waivers can be difficult to
obtain, with long wait times and a lot of back-and-forth.
The coming administration might defer to states a little bit more, Feldpush said.
Rosenbaum said that oft-invoked flexibility is really a misnomer.
It's a term that's going to get misused a lot as a mechanism for justifying potentially very serious
retrenchment in the program, she said. There comes a point at which flexibility cannot begin to
overcome the loss of resources.
There are concerns with Medicaid funding proposals that have been suggested by Republicans
because they could result in significant cuts, Feldpush added. She called budget cuts her group's chief
worry and said if federal Medicaid spending went down, states would be left with hard choices to either
look for new funding sources or limit benefits or eligibility.
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That could, in turn, pass down costs to hospitals that serve many vulnerable patients.
Hospitals shouldered $35.7 billion in uncompensated care in 2015, according to the American
Hospital Association. America's Essential Hospitals members make up 18.3 percent of national
spending on uncompensated care, the organization's 2014 data show.
Pay for Outcomes
The Medicaid program, in the meantime, will continue to move away from fee-for-service toward
managed care plans (which already cover around three-fourths of beneficiaries), value-based
purchasing and quality measures, Medicaid analysts said. Part of that will be a more pronounced
emphasis on what Medicaid offers for elderly and disabled beneficiaries.
Myers said these market trends, by reimbursing based on outcomes, will help to lower costs and drive
value.
The year will remain stablewith overhauls not as quick or dire as some expect, he said, while
policymakers sort through the past three years worth of changes and look ahead for this very complex
program.
It's driving payment and delivery reform, Deborah Bachrach, a partner with Manatt Health in New
York, told BNA. We would expect Medicaid to continue to do that even as discussions as to its future
continue in Washington, D.C.
ACA Changes for Providers
How an ACA repeal will affect providers varies based on provider type.
The American Health Care Association (AHCA), a group for the nursing home industry, doesn't see
any potential repeal of the ACA as problematic, Clif Porter, senior vice president of government affairs
with the group, said. In fact, he said, repealing the ACA wouldn't have a dramatic effect on what
nursing homes do.
What would be problematic is how the law is replaced, Porter told Bloomberg BNA.
Nursing Homes
Many of the proposals floating around Congress on Medicaid reform, such as Speaker Ryan's Better
Way plan or Sen. Bill Cassidy's (R-La.) proposal, would impede nursing homes ability to care for their
patients, he said.
Ryan's plan called for block grants to the individual states to help fund their Medicaid programs.
Cassidy's proposal (H.R. 5979), which he introduced in 2012 when he was a member of the House,
would allow states to establish per capita spending grants on program enrollees.
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Per capita spending limits would be a fundamental change to the structure and financing of the
program, and this is a very complex and politically difficult piece of legislation because it would likely
create winner and loser states, health-care lobbyist Keith Fontenot said. Fontenot is the managing
director of government and public policy in the Washington office of Hooper, Lundy & Bookman PC.
At the end of the day, these proposals would reduce Medicaid spending rather dramatically, Porter
said.
Major reductions in spending would particularly hurt nursing homes because the facilities serve many
Medicaid patients, Porter said. Nursing homes serve some of the frailest patients and are already
losing roughly $22 a day on patients who are dually eligible for Medicare and Medicaid, Porter said.
The AAMC's Marquez said it would be problematic if Congress repeals the Medicaid expansion that
was part of the original 2010 ACA while it alters other parts of the law.
However, Medicaid modification, whether through block grants or introducing per capita limits, is likely
to happen, Marquez said. These changes would take quite a long time to develop and move through
Congress, he added.
Home Health Providers
Home health providers, meanwhile, want to avoid what happened to their industry when the ACA
passed, Joy Cameron, vice president of public policy at the Visiting Nurse Associations of America,
told Bloomberg BNA. The VNAA is an Arlington, Va.-based industry organization for nonprofit home
care providers.The ACA contained provisions that led to a four-year reduction of Medicare's home
health payments, Cameron said. Home health agencies feel like they've paid their part for health-care
reform.
Any replacement of the ACA should include more linkages between quality performance and payment,
Cameron said. The home health value-based purchasing program, which is in place in nine states and
enjoys bipartisan support in Congress, is an example of a program that could be expanded in
legislation that replaces the ACA to reward high quality providers, she said.
Medicare's value-based programs reward health-care providers with incentive payments for the quality
of care they give to beneficiaries.
Piecemeal Repeal
Clif Gaus, president and CEO of the National Association of Accountable Care Organizations
(NAACOS), told Bloomberg BNA that NAACOS is hopeful Congress won't alter the care delivery
provisions in the ACA.
Repealing the financing aspects of the ACA will have a minimal effect on ACOs, Gaus said.
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ACOs, which were created under the ACA, are groups of doctors, hospitals and other providers
working together to provide better, more coordinated care with the aim of lowering Medicare costs.
However, they have had limited success lowering costs.
For example, ACOs in the Medicare Shared Savings Program cost the CMS $216 million in 2015,
Medicare Payment Advisory Commission (MedPAC) staff said in an October presentation.
Data on ACOs reported by MedPAC offer a more detailed look at the ACOs compared with program
information released by the CMS. For example, in 2015, MSSP ACOs generated total program savings
(inclusive of all savings and losses relative to financial benchmarks) of about $430 million, the CMS
said in August. However, MedPAC's data showed the $216 million loss the CMS took for the MSSP
resulted from the agency paying providers $646 million for the savings they generated.
What About Medicare Changes?
With congressional committees focused on repealing and replacing the ACA, major Medicare changes
will probably be pushed back to a later date, Fontenot said.
However, CMS annual payment regulations afford opportunities for the new administration to
undertake new policies, or slow or modify implementation of certain existing policies.
To be quite crass, I think you're going to see many policymakers talk about reforms to Medicare,
Susan Feigin Harris, a Houston-based attorney with Baker & Hostetler LLP, told Bloomberg BNA.
However, nothing will occur until after the 2018 midterms, given the political problems caused by
discussing or proposing major changes to Medicare, she predicted.
Medicare reform is always out there as an issue that Congress could move on, the AAMC's Marquez
said. As with Medicaid, Ryan's Better Way plan would likely serve as a guide for where to start the
conversation on reforming Medicare, according to Marquez.
Changing Medicare may mean moving to a premium support model, with a certain set of soon-to-be
eligible enrollees being grandfathered into the current program models, Marquez said.
The AAMC will work to ensure that any disproportionate share or graduate medical education
payments aren't reduced if Medicare reform becomes a reality in 2017, Marquez said. Disproportionate
share payments are supplemental Medicare inpatient payments given to hospitals with high shares of
low-income patients.
Regulatory Issues
On the regulatory side, the AAMC is anticipating some regulatory relief, Ivy Baer, the group's senior
director and regulatory counsel, told Bloomberg BNA. One issue the group will continue to work on is
getting the CMS to agree to provide hospitals that treat a high number of low-socioeconomic-status
patients with a payment adjustment, she said.
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The 21 st Century Cures Act, which President Obama signed into law Dec. 13, contained a provision
that allows the CMS to adjust for socioeconomic status.
This is a good first step and we're looking forward to working with CMS on it, Baer said.
Hospital industry groups have long urged the Medicare agency to adjust for patient socioeconomic
status when adjusting payments for quality outcomes. The hospital industry, and others, contend there
are several social determinants of health, such as income level and access to adequate food and
transportation, that affect health status but cannot be controlled by providers.
In addition, the home health industry wants Medicare to drop the requirement that forbids nurse
practitioners from providing care to housebound beneficiaries, the VNAA's Cameron said.
Preventing nurse practitioners from caring for home health patients creates a continuity of care issue,
Cameron said. Many times, she said, beneficiaries are under the care of nurse practitioners before
they are transferred to home health agencies. The VNAA is looking for opportunities to work with the
CMS in this area, according to Cameron.
Preclaim Reviews
Cameron is also hopeful that a preclaim review program that requires home health agencies to get a
CMS contractor's approval before beginning treatment is ended in 2017, she said.
To date, the program has only been implemented in Illinois. The CMS last September halted rollout of
the program to several other states with higher-than-average levels of fraudulent claims, due to the
administrative burdens it created in Illinois.
Price, Trump's pick to lead the HHS, has been an adamant opponent of the program.
Price pleased the VNAA by writing letters to the CMS denouncing the program and by introducing
legislation to end preclaim reviews, Cameron said.
Nursing Home Arbitration
The AHCA, for its part, wants to see the CMS change its stance on prohibiting mandatory arbitration
clauses in nursing home admittance contracts, Porter said.
The CMS last fall issued regulations that forbid nursing homes from inserting forced arbitration clauses
into admission contracts as part of its update to the conditions of participation skilled nursing facilities
must follow to receive Medicare reimbursement.
Arbitration is a procedure corporations frequently use to move litigation out of the courts and into the
hands of mediators, who are often employed by the firm alleged of wrongdoing. In arbitration,
mediatorsnot a judge or juryrule on the case.
The AHCA sued the federal government over this issue and the case is pending.
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There have been some positive signs from Trump that his administration is inclined to reduce
regulatory burdens, Porter said. We feel very optimistic about our opportunity to get some measurable
regulatory relief.
Fate of Mandatory Demo Projects
The hospital industry would also like to see fewer regulatory constraints. According to the AEH's
Feldpush, the scope and pace of so-called mandatory demonstrations coming out of the CMS have put
a strain on providers.
I don't have a clear sign on what will happen under Trump, Feldpush said. They should ease up on
the mandatory nature of them.
Examples of mandatory demos include the Cardiac Care Bundled Payment Model and the
Comprehensive Joint Replacement Program. The CMS, in December, made final a rule that
implemented the cardiac care program and added a new payment model to the comprehensive joint
replacement program. Price has decried mandatory demonstration projects while he has been in the
House.
Many of the CMS mandatory pilot projects are administered out of the agency's Center for Medicare
and Medicaid Innovation (CMMI). The ACA authorized the CMMI, so a full repeal of the law could
make it impossible for the agency to continue.
However, NAACOS's Gaus told Bloomberg BNA he can't think of anyone who favors abolishing
CMMI. That doesn't mean there's an appetite to continue with the status quo. Some guardrails should
be placed on its authority, and that's where NAACOS hopes to work with Congress and the new
administration, he said.
Numerof agreed. I think CMMI is going to be changed, she said. The CMMI has spawned a spiraling
array of experiments, and their underlying theme has been to connect payments to outcomes. Some of
the agency's aims, such as ensuring consumer satisfaction, are laudable, she said.
However, the CMMI has worked in a top-heavy way, with bureaucrats in Washington trying to manage
care delivery, Numerof said. Such a system is doomed to fail.
An alternative approach that is likely to unfold in the coming years will involve the CMS setting
payments based on outcomes, but without burdensome quality reporting, she said.
Medicare Payments to Doctors
The new year ushers in the start of Medicare's performance-based reimbursement payment system for
thousands of doctors and other eligible clinicians.
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The CMS's new Quality Payment Program is intended to eventually move 600,000 professionals away
from the traditional fee-for-service payment system that critics say has led to excessive claims without
accountability for taxpayers dollars.
Doctors performance in the 12 months beginning Jan. 1 affects their Medicare payments in 2019, as
required by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Under the law's
two-track system, most providers will participate in the quality measure reporting track known as MIPS,
short for the Merit-based Incentive Payment System.
Lenient Schedule
The Obama administration eased MIPS reporting requirements for 2017, called the transition year, by
offering a lenient reporting schedule in its final rule. It's a move that policy analysts told Bloomberg
BNA was a wise one.
The decision to have 2017 be a soft launch makes it hard for the new program to implode, said David
Introcaso, a senior director at AMGA, a nonprofit trade association supporting multispecialty medical
groups. There's a very low bar for eligible clinicians to be successful.
Although clinicians can have their Medicare reimbursements cut 4 percent for not reporting any
measures, they can choose to do very little and still avoid the chopping block.
Reporting one measure in the quality performance category, one activity in the improvement activities
performance category, or the required measures in the advancing care information performance
category will be considered adequate.
The minimal option is to ensure that clinicians reporting systems are working and they're prepared for
broader participation in the next few years, the CMS said. They won't earn extra funds but neither will
they trigger cuts.
The other two MIPS options require longer reporting periods and more measures, along with the
opportunity to earn as much as a 4 percent bonus. More than 90 percent of the clinicians in MIPS won't
lose or get extra funds in 2019, the agency estimated.
Smart Move
The Medicare agency's pick your pace choices set the stage for MACRA to be successful, John
Feore, a director at Avalere Health, a Washington-based consulting company, said.
If clinicians had to report for the full year starting out of the gate and a number had their
reimbursements trimmed, the result could be legislative action, he told Bloomberg BNA.
In the meantime during 2017, doctors need to decide whether MIPS is a good fit for their practice or if
they want to move to the other track, an advanced alternative payment model, in 2018, Feore said.
Alternative Payment Models
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As many as 120,000 clinicians are predicted to participate during 2017 in one of seven advanced
alternative payment models (APMs) and will be up for a possible 5 percent incentive payment. They
won't have to worry about their reporting score under MIPS, which could lead to as much as a 4
percent cut.
In 2018, the CMS hopes the number of APM participants will increase to 200,000. Among the new
models for 2018 is an accountable care organization that requires less risk than other ACOs of
financial penalties for increased spending and care that doesn't meet quality standards.
In addition, MACRA's technical advisory committee said Dec. 15 that it's considering two additional
models for recommendation to the CMS. One deals with the management of beneficiaries with lung
disease and the other with a team-based approach of caring for surgical patients.
Clinicians need to decide early in 2017 if they want to move to the APM track in 2018, Introcaso said.
Moving to a risk-based system for a practice is not like turning on a light switch and preparations will
have to start early in the year, he said.
Comments Requested
MACRA s final rule asked for feedback in several areas for future rulemaking. Comments were due in
December, and the agency is expected to sift through the comments in 2017. Among the areas is the
re-evaluation of the definition of nominal risk for performance period 2019 and beyond.
MACRA's goal is to get an increasing number of providers on the APM path in order to move them to
risk-based situations in which they receive additional payments for providing high-value care and are
penalized for not meeting targets. Advanced APMs must impose financial risk in excess of a nominal
amount in order for provider participants to qualify for a bonus under the program.
How much financial risk is in excess of a nominal amount is still a concern, and CMS may make
changes as the rule evolves, Introcaso said.
The CMS said in the final rule that further research and analysis on the level of nominal risk is
appropriate to inform the nominal risk standard for 2019.
No Clamor to Repeal MACRA
Unlike the ACA, there's no clamor for Congress to repeal MACRA.
I think MACRA itself will remain as it is for now, Laura Wooster, interim senior vice president of the
American Osteopathic Association, told Bloomberg BNA. The feedback that I've heard from Hill
staffers on both sides of the aisle involved in the drafting of MACRA legislation is that they are pleased
with how implementation by CMS has been going so far.
I find it tough to envision any legislative changes in 2017, Feore said. The program is too new and
there wasn't backlash on the final rule.
Page 14 of 23
In addition, Congress will be preoccupied with the ACA and Medicaid reform, Introcaso said.
Medicare Advantage
Medicare Advantage likely will be in the health policy spotlight in 2017 if talks on privatizing Medicare
gain momentum.
Medicare's managed care option has been touted as a successful example of the interaction between
the private market and Medicare in Ryan's Better Way agenda. Ryan said the proposals in the
document would guide House Republicans legislative plans.
Medicare Advantage is rock solid as ever and we expect it will continue to grow at 4.5 to 5 percent for
the foreseeable future, John Gorman, executive chairman of the Washington-based consulting
company Gorman Health Group, said during a post-election webinar in November.
MA enrollment grew to 17.5 million, or 31 percent of all Medicare beneficiaries, in 2016, MedPAC said
in mid-December. MA growth was about 5 percent, double the overall Medicare enrollment growth,
according to MedPAC, which advises Congress on Medicare policy.
If Ryan's plan to transform the benefit into a market-based model known as premium support takes sail,
it will be like a tailwind for MA, Gorman said. He said he could foresee as many as 30 million
enrollees in 2023.
Call Letter Coming
Insurers will be on the lookout for MA regulatory policies in the CMS's 2018 draft Call Letter and rate
notice, which govern MA policy and payment. The documents are due out Feb. 2.
AHIP said it hopes the Call Letter won't contribute to the ever-increasing set of burdensome
government requirements in MA.
That will be among the topics that AHIP will be having conversations about over the next several
months, the group said in a document on health policy issues released in December.
There has been a trend toward increasing regulation of a whole range of MA issues, Mark Hamelburg,
AHIP's senior vice president of federal programs, told Bloomberg BNA.
No new program requirements should be imposed on MA in 2018, the group said in its document. This
is necessary to avoid increased costs for beneficiaries, providers and plans, AHIP said.
The group is hoping the incoming CMS team will re-examine the regulatory scheme and initiate
changes only to reduce burdens and increase plan flexibility to offer innovative benefits. However,
2017 may be too early for CMS administrator nominee Verma to put her imprint on the proposed Call
Letter.
Encounter Data
Page 15 of 23
Some of the uncertainties facing plans in the coming year are from implementation of changes the
CMS made recently, Hamelburg said. These include a new risk adjustment model effective this year
that takes into account the socioeconomic status of enrollees.
The idea of the model is to shift MA funding to help health plans that enroll more lower-income
Medicare beneficiaries.
Another change the group is worried about is the impact of the use of encounter data on plans
payments, he said.
The CMS is transitioning to the use of MA encounter data for calculating enrollees risk scores and
away from data derived from fee-for-service Medicare. Risk scores take into account each enrollee's
demographics and illness level and are used to adjust plan payments.
Encounter data are considered more comprehensive than the beneficiary diagnosis data the agency
currently uses.
However, AHIP said MA plans have identified numerous unresolved issues with the data and are
concerned they will receive a rate cut if the CMS expands its use of encounter data to evaluate risk.
A top priority for AHIP is for CMS in its Call Letter to delay the use of encounter data, Hamelburg said.
Contract Consolidations
The CMS's star ratings will continue to drive the MA market in 2017, Gorman said.
The quality rating system uses measures, such as a plan's responsiveness, to score MA plans based
on a one-to-five scale. Those that score four stars or higher receive quality bonus payments. The stars
are given at an organization's contract level, rather than the individual plan level.
Some companies have been folding enrollees in a contract with lower ratings into another contract
with higher ratings to optimize the bonus payments, MedPAC staff said in mid-December.
This has been going on for the past several years, they said. In 2017, about 700,000 enrollees were
moved from a contract that wouldn't have gotten a bonus to one in bonus status, MedPAC said.
MedPAC is expected to look at one way that plans might be trying to increase their bonus payments.
The commissioners said they want to continue discussions in 2017 on the practice by some
organizations of using contract consolidations to boost their star ratings. MedPAC recommendations
could follow.
Part D Stability
While change is in the air for the ACA and Medicaid, the Part D drug benefit, like the MA program, is
viewed as a private-sector success and is an unlikely candidate for significant revision.
Page 16 of 23
Speaker Ryan described his Medicare premium support program concept as following aspects of the
Part D formula. He said he would like to adopt the competitive structure proven successful by
Medicare Part D so that it would benefit from marketplace competition.
I don't see a ton of change, Scott Musial, a senior vice president at Evolent Health, a Washingtonbased health plan consulting company, said. The Part D program has really put a very competitive
product into the market with low premiums, he told Bloomberg BNA.
Even if House Republicans were to move forward with more major Medicare changes, such as
premium support, there still needs to be some sort of an infrastructure for support of the drug benefit,
Juliette Cubanski, associate director on Medicare policy at the Kaiser Family Foundation in Menlo
Park, Calif., told Bloomberg BNA.
Beginning in 2024, Ryan envisions that beneficiaries would be given a choice of enrolling in private
plans that directly compete with the traditional fee-for-service Medicare program on a newly created
Medicare Exchange. Medicare would provide a premium support payment either to pay for or offset the
premium of the plan chosen.
However, there would still be a need for a drug benefit for those who don't sign up for a private plan,
Cubanski said.
Drug Prices
In the area of pharmaceuticals, the hot topic will be drug price escalation, Musial of Evolent Health
said. Even generics are going up at an alarming rate.
Analysts say tamping down drug prices in general, particularly of specialty drugs, will continue to be a
theme in 2017.
Prices of drugs that treat conditions like rheumatoid arthritis and multiple sclerosis are a growing
concern for Medicare beneficiaries, Cubanski said.
Although Trump had indicated interest in allowing Medicare to negotiate drug prices directly with
pharmaceutical companies, Musial said the implication on the marketplace would be so huge that it
would result in insurers withdrawing and creating less competition.
Call Letter
Like the MA program, Part D will be affected by the CMS's Call Letter and rate notice that will be
released a couple weeks after Inauguration Day.
I wouldn't expect to see any major bombshells, at least not this year, Cubanski said.
MedPAC's April 2016 slate of 10 recommendations to revise the drug benefit on its 10 th anniversary
might have gotten more legislative attention if the ACA repeal wasn't on the front burner, she said.
Page 17 of 23
The congressional advisers had recommended lowering Medicare's individual reinsurance subsidy
from 80 percent to 20 percent and removing antidepressants and some immunosuppressants from the
benefit's six protected classes, among other changes.
DSH Litigation Aplenty
In the legal outlook for Medicare in 2017, litigation over disproportionate share hospital (DSH)
payments continues to bedevil hospitals, the HHS and the federal courts.
In Allina Health Sys. v. Burwell, D.D.C., No. 16-cv-150, filed1/29/16, hospitals and the HHS are
battling over the how Medicare managed care days should be treated when calculating DSH
payments.
Kenneth Marcus, a partner with Honigman Miller Schwartz and Cohn LLP in Detroit, said the DHS
litigation will have a major impact on hospitals.
The HHS remains steadfast in its position that a Medicare managed care beneficiary should be
deemed entitled to Part A benefits for purposes of the DSH payment. The court is reviewing the
HHS's motion to dismiss the case.
Separate litigation involving some of the same parties on how Medicare managed care days are
accounted for in DSH payments for a later regulation is also pending at the U.S. Court of Appeals for
the District of Columbia Circuit (Allina Health Sys. v. Burwell, D.C. Cir., No. 16-5255, filed8/31/16).
Hospitals are appealing a district court win for HHS that upheld the agency's view patients whose care
was paid through Medicare Advantage should be counted as patients entitled to Part A benefits,
which reduces hospitals DSH payments.
Another DSH case to watch is the Univ. of Wash. Med. Ctr. v. Burwell, W.D. Wash., No. 16-cv-1587,
filed10/18/16. Joseph D. Glazer, principal of The Law Office of Joseph D. Glazer PC in Princeton, N.J.,
said the plaintiff hospitals in this recently filed litigation are seeking consistency from the HHS in its
interpretation of the phrase entitled to benefits under [Medicare] Part A when applied to different
portions of the DSH calculation.
Hospital Cases to Watch
The two-midnight rule litigation is yet to be fully resolved, even after the HHS decided to eliminate the
rule starting in 2017, along with the rule's 0.2 percent inpatient payment reduction (Shands
Jacksonville Med. Ctr. v. Burwell, D.D.C., No. 14-cv-263, stay granted5/19/16).
Under the original two-midnight policy, the CMS said Medicare Part A payment generally wasn't
appropriate for hospital stays not expected to span at least two midnights.
Page 18 of 23
Although the HHS proposed a one-time 0.6 percent inpatient payment boost in FY 2017 to
compensate hospitals for the prior three years of cuts, the hospitals grievances haven't been fully
addressed.
In particular, some of the Shands hospital plaintiffs allege they are facing the effects of a decline in
patient admissions caused by the two-midnight rule, and the hospitals dispute whether and how much
interest is due to the hospitals for the three years the rule was in effect. The hospitals continue to
challenge the rule's continued effects on their 2014-2016 inpatient reimbursements.
Mark D. Polston, a partner in King & Spalding's health-care practice in Washington, said hospitals
have caught the agency basing their predictions on flawed data, and the court could order the CMS to
reevaluate corrected inpatient data, and determine whether a 2014-2016 rate increase is warranted.
Hospital arguments on Medicare outlier payments, which are reimbursements for especially costly
treatment cases, will be heard by the D.C. Circuit in Banner Health v. Burwell, D.C. Cir., No. 16-05129,
filed5/23/16.
The plaintiff hospitals are seeking hundreds of millions of dollars in disputed reimbursements, and are
challenging both the payment methodology and the annual threshold level at which the outlier
payments are made.
Attorney Stephen Nash with Squire Patton Boggs in Denver represents the plaintiffs in Banner Health,
and said a court ruling invalidating either the payment methodology or threshold regulation would set
a national precedent.
Nash said the D.C. Circuit might also allow the HHS to further explain its regulations, or a settlement
could be reached, which wouldn't benefit hospitals that aren't involved in the lawsuit.
The D.C. Circuit will also hear an appeal of whether rules on when the Medicare outlier payment
reconciliation process is triggered required public notice and comment (Clarian Health West, LLC v.
Burwell, D.C. Cir., No. 15-5307, filed10/27/16).
A lower court ruled on Aug. 26 that the HHS should have sought public comment before implementing
the outlier payment reconciliation policy, though the HHS filed an appeal.
Although the appeal only involves a single hospital, Marcus said numerous hospitals have suffered
outlier reconciliations and thus the outcome will be significant.
ALJ Backlog
Page 19 of 23
Providers will also be looking at whether the HHS can hit the first court-mandated target for reducing
the backlog of Medicare claim appeals at the administrative law judge level by the end of the year. The
U.S. District Court for the District of Columbia ordered a 30 percent reduction in the backlog, currently
at roughly 658,000 claims (Am. Hosp. Ass'n v. Burwell, 2016 BL 403616, D.D.C., No. 14-cv-851,
12/5/16).
Marcus said HHS would pay lip service to the backlog, but will simply provide excuses as to why it
can't reduce it.
Carey B. McRae, a partner with Bradley Arant Boult Cummings LLP in Washington, said he thinks the
HHS will hit the first annual reduction target, but meeting the next three annual targets simply requires
more manpower and funding than Congress is likely to provide.
Marcus's prediction may already being coming to fruition, as the HHS filed a motion with the court Dec.
15 saying it couldn't meet the annual deadlines while still adhering to its statutory obligation of only
paying meritorious Medicare claims. The HHS asked the court once more to allow the agency full
discretion on how to resolve the backlog.
Eric Zimmerman, a health-care partner at McDermott Will & Emery LLP in Washington, said the fouryear time table will not bring relief fast enough for providers, even if HHS can hit the annual targets,
and said Congress should provide additional relief.
Nevertheless, Polston said the HHS will be able to achieve a big step toward at least the first annual
reduction target by offering global settlements to hospitals.
On the subject of global settlements, Nash said the claim settlement rate offered by the HHS would
have to be better than the reversal rate that Medicare providers are currently achieving (as high as 80
percent reversal in some subsectors), or providers will wait it out, give up the use of those funds, and
continue their historical success rate.
However, Polston said further large reductions mandated beyond 2017 will be much more difficult, and
[t]hey'll need to get creative.
Data Privacy
One of the big health-care privacy questions for 2017 is the future of the HHS Office for Civil Rights
and what direction it will take in enforcing the Health Insurance Portability and Accountability Act
Privacy and Security rules.
Kirk Nahra, an attorney with Wiley Rein in Washington who specializes in privacy and security issues,
said a new director will take over the OCR soon, but no one knows who that will be or what agenda he
or she will pursue.
Page 20 of 23
In general, I expect much of the senior leadership of the OCR to remain, at least for awhile, so I think
it's unlikely there will be a significant change in direction, Nahra said.
Nahra also said he'd be surprised if there was an increase in HIPAA enforcement because the OCR
won't be getting more money or additional staff.
At the same time, Nahra said he didn't expect there'd be an push to decrease OCR enforcement
unless there are serious budgetary issues.
A major concern for providers in 2017 will be around security breaches, Nahra said.
Providers, especially smaller providers, are really having a hard time keeping up with security
concerns, he said.
This is less of an enforcement issue and more a real worry about the effects of a breach, Nahra said,
which can damage operations, reputations and finances.
Accelerating HIPAA Enforcement
However, Reece Hirsch, a health-care attorney with Morgan, Lewis & Bockius LLP in San Francisco,
said he expects the OCR's oversight of the HIPAA Privacy and Security rules will accelerate through
2017.
The current round of HIPAA Phase 2 desk audits of business associates will give the OCR an
opportunity to assess the state of HIPAA compliance for that sector, and additional enforcement action
will inevitably follow, Hirsch said.
The OCR audits are intended to determine if health-care organizations and their contractors are
complying with the HIPAA Privacy, Security and Breach Notification rules. A first round of audits
focused solely on covered entities, while the ongoing round is looking at both covered entities and
business associates.
Hirsch said the biggest HIPAA compliance concern facing providers in 2017 is the proliferation of
sophisticated and damaging cyberthreats targeting medical information.
Providers should ensure they have a robust security compliance program, Hirsch said, built upon a
formal security risk assessment. OCR has consistently hammered home the importance of security
risk assessments in its recent enforcement actions, audits and public statement, Hirsch said.
Eric Fader, a health-care attorney at Day Pitney LLC in New York, agreed enforcement activity at the
OCR is likely to be little changed in 2017 as the administration occupies itself with repealing the
Affordable Care Act.
The higher level of enforcement activity that we saw in 2016 should continue, and it's also likely the
Phase 2 HIPAA audits will spawn new areas of enforcement activity, Fader said.
Page 21 of 23
The newly uncovered enforcement areas could focus directly on audit subjects based on perceived
noncompliance with the HIPAA Privacy and Security rules, or could be a result of extrapolating audit
failing against a broader pool of providers, Fader said.
While HHS secretary-nominee Price is viewed as a friend to physicians, Fader said he didn't think that
would extend to protecting HIPAA violators from sanctions.
Although federal funding for certain health-care initiatives could be cut if the administration needs to
allocate funds to pay for other priorities, ramping up the number of OCR HIPAA enforcement action to
generate more multimillion-dollar settlements might be seen as an easy way to bring money into the
system, Fader said.
Colin Zick, a health-care attorney with Foley Hoag LLP in Boston, said he expected there will be more
OCR settlements of HIPAA violations in 2017, as well as a general ratcheting up of enforcement
activity.
A prime motivation of settlement is to encourage covered entities to step up their compliance game,
and there's no evidence that's happening across the health-care and life sciences industries, Zick
said.
Zick said until data breaches start to decline, the OCR can be expected to keep increasing
enforcement activities and assessing higher fines.
Ransomware and faithless employees are major concerns for health-care providers in 2017, Zick said.
To prevent violations in these spaces, covered entities need to intensively look at their information
technology systems and engage in substantial training, as well as perform the right follow-up when
people leave, Zick said, referring to conducting exit interviews and shutting off system access for
former employees.
Electronic Health Records
On the health information technology front, providers can expect a continued push toward electronic
health record adoption and interoperability, Nahra said.
Nahra said the recently passed 21 st Century Cures Act appears to instruct various Office of the
National Coordinator for Health Information Technology groups to go back to the drawing board on
EHR adoption.
This could certainly be an area where there is an administration push to simplify things, which could
make these things work better or work worse, Nahra said.
The administration could also cut the ONC's budget or de-emphasize its activities, he said. Nahra said
he wasn't optimistic on interoperability over the next few years because most of the administration's
attention is likely to be focused on repealing the ACA.
Page 22 of 23
As for the meaningful use program, it's slated to change in 2017 courtesy of MACRA.
For example, MACRA's Merit-based Incentive Payment System (MIPS) will replace the meaningful
use program for physicians with the Advancing Care Information program, though meaningful use will
still be in place for hospitals.
Under the meaningful use program, hospitals and physicians have been required to certify they're
using EHRs to accomplish a range of tasks or face Medicare payment cuts. The Advancing Care
Information program will take a flexible approach to EHR use and will not require physicians to report
as many metrics as meaningful use.
2017 could be the year the meaningful use becomes not so meaningful anymore, Zick said.
The de-emphasis on meaningful use ties directly into Price's experience and views as a physician,
Zick said. Price has a history of working to reduce the burdens of meaningful use, including
introducing a bill in 2015 that would have provided a hardship exemption from meaningful use
reporting requirements, Zick said.
The new year will also see a change in how EHRs are certified, with the federal government directly
certifying the EHRs as opposed to contractors.
Doctors are required to use federally certified EHR systems to gain credit for participating in various
Medicare payment schemes, including the meaningful use program and MIPS.
Nahra said he didn't think the certification changes would have much of an impact, other than to
centralize and standardize the approach.
I expect this to be a footnote, Nahra said.
To contact the reporters on this story: Sara Hansard in Washington at shansard@bna.com; Victoria
Pelham in Washington at vpelham@bna.com; Alex Ruoff in Washington at aruoff@bna.com; James
Swann in Washington at jswann1@bna.com; Eric Topor in Washington at etopor@bna.com; Michael
D. Williamson in Washington at mwilliamson@bna.com; and Mindy Yochelson at
MYochelson@bna.com
To contact the editors responsible for this story: Brian Broderick at bbroderick@bna.com; Kendra
Casey Plank at kcasey@bna.com
Health Care Daily Report Health Insurance Report
Copyright (2017), The Bureau of National Affairs, Inc.
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Bloomberg Government - OUTLOOK 2017 - ACA Repeal Dominates Health Policy Predictions (12.29.16)

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OUTLOOK 2017: ACA Repeal Dominates Health Policy

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