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Government Relations Update - October 30, 2012

Pennsylvania Issues


Medical Assistance Rapid Reinstatement Project: Over the last few years, the Pennsylvania Department of Public Welfare (DPW) failed to verify in a timely manner the continued eligibility of about 385,000 Medicaid recipients. In an effort to correct the problem, DPW began sending out redetermination packets with questionnaires in July 2011 to hundreds of thousands of Medical Assistance (MA) beneficiaries who were overdue for coverage verification. From July 2011 until January 2012, DPW terminated MA benefits for about 100,000 households, including approximately 90,000 children, for failure to respond to the redetermination requests.

In response to concerns raised by various community organizations, Community Legal Services and the law firm of Morgan, Lewis & Bockius sought reinstatement of MA benefits for these families and threatened to sue DPW if it failed to comply. On October 26, 2012, DPW agreed to permit approximately 100,000 individuals who were terminated from MA in the past year to seek expedited reinstatement of their benefits.

New Jersey Issues


New Jersey Hospital Economic Impact Report: On October 24, 2012, the New Jersey Hospital Association (NJHA) released the 2012 New Jersey Hospital Economic Impact Report. According to the report, New Jersey hospitals contributed $19.5 billion to the state economy in 2011 by employing over 140,000 individuals, paying nearly $8 billion in salaries and causing the payment of $435 million in state income taxes by hospital employees.


S.2135: New Jersey Health Benefit Exchange Act. As previously reported, the Patient Protection and Affordable Care Act (PPACA) creates statewide health insurance exchanges by 2014 for individuals and small businesses to compare health insurance plans and rates. If a state fails to create an exchange, the federal government must design one for it. On October 4, 2012, the New Jersey State Senate approved legislation establishing a statewide health insurance exchange, and the New Jersey State Assembly passed an identical bill on October 18, 2012. Assemblymen John DiMaio (R-Warren, Hunterdon) and Erik Peterson (R-Warren, Hunterdon) both voted against the legislation. The bill has been forwarded to the Governor for his signature.

Governor Christie (R-NJ) vetoed a similar bill in May in advance of the United States Supreme Court decision regarding the constitutionality of PPACA. The Governor has since stated that he wants to consider all options before approving an exchange. NJHA supports the bill.

Federal Issues


Temporary Medicaid Increase: Pursuant to PPACA, primary care physicians billing Medicaid are scheduled to receive amounts equal to the Medicare fee schedule for such services beginning on January 1, 2013. The higher rate, which represents a 64% payment increase for Medicaid services, is planned to continue for two years and cost an additional $11 billion. Although the fee increase is scheduled to begin shortly, the Centers for Medicare and Medicaid Services (CMS) have not issued final rules implementing the payment change. Also, while the fee increase is intended to expand the number of Medicaid providers, critics argue the two year span is insufficient to cause additional physicians to accept Medicaid on a long term basis.

Medicare Sustainable Growth Rate Repeal: On February 17, 2012, Congress approved a bill extending the then current Medicare physician fee schedule rates through December 31, 2012. If Congress fails to extend the rates again, the Medicare physician fee schedule will decrease by 32% on January 1, 2013, and St. Luke's Physician Group will experience an annual payment reduction of more than $10 million. On October 15, 2012, more than 100 national and state physician organizations, including the Pennsylvania Medical Society and the American Medical Association, urged lawmakers to adopt a permanent solution to the fee schedule problem.

Multistate National Health Insurance Program: The Obama administration recently announced that it will soon introduce at least two nationwide health insurance plans under contract with the federal government and offered to consumers in every state. The multistate plans were included in PPACA as an alternative to a single payer system. The plans are intended to compete with those offered by private insurers, although it is unclear whether these plans will be monitored by state insurance agencies or be required to pay state fees and taxes. Premiums and benefits for the multistate insurance plans will be negotiated by the United States Office of Personnel Management, the agency that arranges health benefits for federal employees. In preparing cost estimates, the Obama administration projected that each national plan would have 750,000 people enrolled in the first year. The National Association of Insurance Commissioners, which represents state regulators, expressed hesitation regarding the multistate plans until additional details are made available.


H.R. 6575: Medicare Audit Improvement Act of 2012. The Recovery Audit Contractor (RAC) program was authorized as a Medicare demonstration project by the Medicare Modernization Act of 2003 to identify and recover improper Medicare payments made to healthcare providers. The RAC program was made permanent by the Tax Relief and Health Care Act of 2006 and then extended to the Medicaid program through PPACA. The program has been criticized by providers faced with redundant audits, unmanageable medical record requests and inappropriate payment denials. In addition, RAC auditors are frequently paid on a contingency basis, causing some of them to be overly aggressive. According to the American Hospital Association (AHA), hospitals are successfully overturning 75% of all RAC denials. On October 16, 2012, Congressman Sam Graves (R-6-MO) introduced legislation to reform the RAC program. The bill would limit documentation requests permitted by RAC auditors and require RAC auditors to pay penalties for repeated failures to meet program guidelines. The AHA, the NJHA and the Hospital Association of Pennsylvania (HAP) support the legislation. The bill has been assigned to the House Committee on Ways and Means and the House Committee on Energy and Commerce.