How Health Reform Would Restrict Annual And Lifetime Limits

As the Senate starts to debate health reform, Health Reform Talk begins a series comparing similar, but not identical features of the legislation already passed in the House (H.R. 3962) and the bill being considered in the Senate (H.R. 3590). These are features likely to survive in health reform legislation and which will directly affect employers. For today, provisions regarding annual and aggregate limits in group health plan are considered.

Both the House and the Senate legislation remove limits in annual and lifetime benefits from group health plans, but the two bills do so in different ways:

Senate (H.R. 3590): Sec. 1001 of the bill prohibits a group health plan and health insurers from establishing lifetime limits on the dollar value of benefits or “unreasonable annual limits.” However, the Senate bill does not prohibit self funded health care plans from placing annual or lifetime limits on “specific covered benefits” as long as those limits are not prohibited by law (for example, a limit on AIDS coverage likely would be prohibited by the Americans with Disabilities Act, and a separate limit on mental health coverage would be prohibited by the Mental Health Parity Act).

Sec. 1001 would take effect for plan years beginning on or after six months after the date of enactment.

House (H.R. 3962): Sec. 109 prohibits all group health plans and health insurers from imposing an aggregate dollar lifetime limit on benefits payable under a health plan. This provision would take effect on the date of enactment.

The House bill also prohibits health plans that are required to offer an essential benefits package from imposing any annual or lifetime limit on covered health care items and services. This provision would apply to all plans offered through the Insurance Exchange starting in 2013 (mostly small employer plans) and all employer plans starting in 2018.

Happy Thanksgiving

The editors of Health Reform Talk wish you a happy and fulfilling Thanksgiving.  We will begin posting again on Monday, Nov. 30.

Botax could increase cost of beauty

The cost of vanity could soon go up and plastic surgeons are probably not feeling too thankful about it this Thanksgiving. Tucked in the Senate’s latest version of health reform, released last week, is a provision that would slap a five-percent excise tax, dubbed by many as the “Botax,” on elective cosmetic surgeries and procedures, such as Botox, facelifts, breast implants, tummy tucks, teeth whitening, and the like. The tax would apply regardless of whether the procedure is covered by insurance or paid out of pocket.

However, the tax would not apply to surgeries and procedures that are done to fix deformities arising from or directly related to a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease. I suspect that, in many cases, this would become a close call.

Under the proposal, the tax would be paid by person on whom the procedure is performed and would have to be collected and remitted by the doctor or facility performing the procedure. If the doctor or facility doesn’t collect the tax, they would be responsible for paying it.

Though it’s estimated that the new tax would bring in an estimated $5 billion to help pay for health reform, some find this doubtful. For instance, Dr. Patrick McMenamin, the president of the American Academy of Cosmetic Surgery, points to the experience of New Jersey, which is the only state to impose a cosmetic surgery tax, claiming that the state has generated 59 percent less than expected by its tax.

Not surprisingly, doctors see plenty of gray areas in determining which surgeries and procedures would be covered by the tax and which would not. For example, ABC News reports, doctors wonder “whether breast reconstruction after a mastectomy would count as cosmetic because a ‘disfiguring disease’ didn't misshape a woman's breasts, the treatment did.” Also unclear is whether the tax would be imposed on related fees, such as anesthesia.

As it currently stands in the Senate bill, the new tax would apply to procedures occurring on or after January 1, 2010.

Anti-botax websites are already springing up. Why am I not surprised?

Medicare Fraud and Abuse Losses

Medicare’s problems with billions of dollars in fraudulent claims payments have been in the news lately. This issue is particularly galling as Congress struggles for ways to pay for health reform without breaking the national bank. President Barack Obama has said that there is enough waste and fraud in the health care system to pay for health reform.

A CBS News’ 60 Minutes segment on October 25 focused on the Medicare fraud issue which is estimated to cost taxpayers $60 billion a year. In that CBS report, one fraud perpetrator said he stole $20 million from Medicare and it was “real easy—you’d file a claim and in 15 to 30 days you’d have a deposit in your bank account.” As Steve Kroft, the 60 Minutes reporter, noted in the segment, the “only victims are the American taxpayers and they don’t even know they’re being ripped off.”

What the 60 Minutes segment, or other media sources, fail to report is that Medicare itself does not administer or pay medical claims. The Medicare agency, the Centers for Medicare and Medicaid Services (CMS), contracts with private health insurers such as a Blue Cross Blue Shield plan, or claims administrators to pay Medicare claims. Currently, seven fiscal intermediaries and eight carriers pay hospital and outpatient medical claims, respectively. As the Medicare site explains, these contractors are responsible for claims processing, payment safeguards, and financial management.

So, some of us reasoned, shouldn’t the Medicare claims contractors catch these blatantly fraudulent claims, such as those for two prosthetic arms for a beneficiary who has never had any surgery to remove those limbs, and not pay for them? Once the claims are paid, the government often cannot recover the fraudulent payments because the fraudsters have closed up shop and disappeared without a trace.

What gives? For one thing, the Medicare law requires that claims for medical services be paid within 15 to 30 days, so, as a Medicare spokesperson told me, if the paperwork looks “clean” (whatever that means), the Medicare contractor pays the claim. Any claim review for appropriateness is done after the claim is paid, by which time….

Since Congress wrote the legislation requiring the prompt claims payment, why can’t CMS ask Congress to fix the claims payment requirement to allow for investigation prior to payment? Because, the CMS spokesperson explained, medical providers would cry “foul” if their claims payments were delayed; after all, they can count on Medicare to pay claims a lot sooner than other, private, payers.

Another obstacle to fraud prevention in Medicare is the multiple number of contractors and uncoordinated claims payment systems for hospital claims and for other medical claims. CMS is working to establish an “Enterprise Data Center” that will house claims processing software systems for Medicare claims to consolidate the current large number of data centers.

Other reforms intended to reduce improper and fraudulent claims include implementing a Healthcare Integrated Genera Ledger and Account System, hiring a “Program Integrity Contractor” for each geographic zone to handle fraud and abuse; and implement a limited number of shared systems (dubbed Shared Systems Maintainers) for all contractors to use for claims and related processing. Furthermore, by 2011 CMS will have transitioned to new regional Medicare Administrative Contractors (MACs) that will process together claims for Medicare Part A (hospital) and B (medical) claims), which currently are processed by different contractors..

Maybe these reforms will help reduce the dollars lost to Medicare fraud, but I suspect that until stricter requirements and regulation for medical provider participation and claims submission documentation are adopted, the problem will continue unabated.

A boost for health insurance cooperatives in H.R. 3962

A premise underlying the 2009 push for health care reform is the perception that private, for-profit insurers have not succeeded in providing sufficiently broad access to health insurance at affordable prices. Thus one aspect of the debate has centered, whether rightly or wrongly, on the search for an alternative to private insurance.

The hotly-debated "public option," contained in varying form in both the House and the Senate bills, is one example of such an alternative. Another is the notion of a not-for-profit health insurance cooperative, which received attention last summer as a less-controversial alternative to the public option.

Not-for-profit cooperatives have existed for years in other contexts. One example is in the delivery of electricity to rural areas--Colorado's is just one example of such a cooperative. A few health insurance cooperatives have also existed for years. Current examples include HealthPartners in Minnesota and the Group Health cooperative based in Seattle, Washington.

The Democrats continue to battle for the survival of the public option. So, there's no deep dive into the cooperative approach in the House version of health care reform (H.R. 3962). However, via Act Sec. 310, the House does put its toe in the water.