Michigan Moves One Step Closer to a Federal-State Partnership Health Exchange

On February 27, 2013, the Michigan House Appropriations Committee overwhelmingly approved $30.67 million in federal grant money to establish a State Partnership Exchange.  A day later, House Bill 4111, which permits the state to accept the federal grant, passed the Michigan House of Representatives with a vote of 78 to 31. The bill now moves to the Michigan Senate.

This week’s actions move Michigan one step closer to creating a State Partnership Exchange.  After legislation to create a state-based health exchange failed in late 2012, the federal-state partnership was Michigan’s only option to be involved with the state’s health exchange in 2014.  Michigan plans to use these funds to perform the plan management and consumer assistance functions of the State Partnership Exchange.  In addition, the funds will help Michigan bring its Medicaid and CHIP programs online with the exchange.

If the HB 4111 is passed in the Senate, Michigan can move forward with its plans under the State Partnership Exchange model.  According to the United States Department of Health and Human Services (“HHS”), a State Partnership Exchange allows a state to assume primary responsibility for carrying out certain activities related to plan management and/or consumer assistance and outreach.  With respect to plan management, the scope of state responsibilities may include certifying health plans for the exchange and the day-to-day administration and oversight of health plan issuers.  On the consumer front, HHS hopes to draw on a state’s knowledge and experience regarding the needs of the state’s population.  Here, the scope of state responsibilities may include: the day-to-day management of the Exchange Navigators; the development and management of a separate, in-person assistance program; and the creation of outreach and educational activities.

I will continue to provide updates as details related to Michigan’s health exchange unfold.

© 2013 Michael P. James, J.D., M.B.A., CSSGB

To find out more about the Michigan health exchange and the impact the Affordable Care Act has on health care, contact attorney Michael James at mjames@michaeljameslaw.com, 810-936-4040 or www.michaeljameslaw.com. Michael James provides representation and counseling related to all facets of business enterprise and health care matters.

Changes in Health Care Laws Allow Retailers to Expand the Scope of Rewards Programs

Introduction:

Rewards programs have become an increasingly popular and important way for businesses to attract new customers and retain their most profitable clientele.  In addition, these programs provide companies with a wealth of data related to consumer purchases that can be used to forecast demand and create targeted marketing initiatives. Typically, rewards programs consist of coupons or rebates given by a retailer to a customer after the customer surpasses specific spending thresholds.  Rewards are usually redeemable on future purchases at the retailer or one of the retailer’s business partners.

Prior to the Patient Protect and Affordable Care Act (“ACA”), retailers faced potential exposure if their programs rewarded customers for the dollars spent on items covered by federal health care programs.  Therefore, retailers generally excluded purchases of medical devices, medical supplies and prescription drugs covered by Medicare and Medicaid from their rewards programs. However, the ACA has created new regulations that directly affect the permissible scope of retailer rewards programs.  As a result, retailers that comply with the new regulations may be able to expand their programs to include purchases related to items covered by federal health care programs.

Changes in Health Care Regulations:

Civil Monetary Penalties

Section 1128A(a)(5) of the Social Security Act (“Act”) provides for the imposition of civil monetary penalties (“CMP”) against any person who offers or transfers remuneration to a Medicare or state health care program (including Medicaid) beneficiary that the benefactor knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of any item or service for which payment may be made, in whole or in part, by Medicare or a state health care program.  The Office of Inspector General (“OIG”) may also initiate administrative proceedings to exclude such party from the federal health care programs.  “Remuneration” includes the transfer of items or services for free or for less than fair market value.  The OIG has taken the position that incentives that are only nominal in value are not prohibited by the statute, and has interpreted “nominal in value” to mean no more than $10 per item or $50 in the aggregate on an annual basis.  Therefore, before the ACA, programs that offered significant rewards to customers based on their purchase of medical devices, medical supplies and prescription drugs covered by programs like Medicare would likely be in violation of the Act and be subject to CMP.

However, the ACA amended the definition of “remuneration” for purposes of CMP by adding a new exception for rewards offered by retailers.  Under the ACA, retailer rewards do not constitute “remuneration” for CMP purposes if they meet the following three criteria:

1)     The rewards consist of coupons, rebates or other rewards from a retailer;

2)     The rewards are offered or transferred on equal terms available to the general public, regardless of health insurance status; and

3)     The offer or transfer of the rewards is not tied to the provision of other items or services reimbursed in whole or in party by the Medicare or Medicaid programs.

Based on this exception, retail rewards programs should be able to avoid CMP as long as they are structured correctly.  If the retailer offers rewards in the form of coupons, rebates or other types of rewards based on a customer’s purchases, the first prong of the exception will likely be satisfied.  In order to satisfy the second prong, the rewards program must be offered on equal terms to all customers.  In other words, all customers of the retailer must be eligible to participate in the rewards program.  The final prong will likely create the most difficulty for retailers.  The rewards program cannot be tied to the provision of other items or services reimbursable in whole or in part by the Medicare or Medicaid programs.  Retailers will have to develop rewards programs that comply with this regulation for both “earning” and “redeeming” transactions.  Retailers should make it a priority to utilize the knowledge of an experienced business and health care attorney to develop a plan that enhances business objectives, satisfies federal regulations and avoids liability.

The Anti-Kickback Statute

The Anti-Kickback Statute (“AKS”) prohibits the payment or receipt of remuneration in return for referring individuals for items or services reimbursable by a federal health care program.  See Section 1128B(b) of the Act.  Under the AKS, “remuneration” includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind. The statute has been interpreted to cover any arrangement where one purpose of the remuneration is to obtain money for the referral of services or to induce further referrals.  Violation of the statute constitutes a felony punishable by a maximum fine of $25,000, imprisonment up to five years, or both.  A violation of the AKS will also lead to an automatic exclusion from federal health care programs, including Medicare and Medicaid.

Unfortunately, the AKS does not have a exception to the definition of “remuneration” similar to the one that was created by the ACA for CMP.  However, the OIG recently released an Advisory Opinion related to the AKS and retailer rewards programs.  Although Advisory Opinions have limited application and authority, the OIG’s analysis and determinations are insightful.

The OIG was asked to evaluate a rewards program of a retailer that owned and operated thirteen supermarkets, most of which had in-store pharmacies.  The retailer’s rewards program permitted customers to earn gasoline discounts at a partnering gas station based on the amount customers spent on purchases in the retail supermarkets, including the cost-sharing amounts paid by customers on items covered by federal health care programs purchased at the in-store pharmacies.

After evaluating the retailer’s rewards program, the OIG found that the program posed a minimal risk of fraud and abuse.  The OIG noted that the retailer’s stores sold a broad range of groceries and other non-prescription items.  As such, the risk that the rewards program would steer beneficiaries to the retailer’s stores to purchase federally reimbursable items or services was low.  Customers were not required to purchase prescription items to earn rewards and there was no specific incentive for transferring prescriptions to the retailer’s pharmacies.  The OIG also determined that the rewards program would not likely lead to an overutilization or otherwise increase the costs to federal health care programs.  Any cost-sharing amounts counted towards a customer’s rewards would result from prescriptions already prescribed, and the rewards could not be used on future prescription purchases.  Ultimately, the OIG determined that it would not impose sanctions on the retailer in connection with the AKS.

Conclusion:

Based on the changes to the regulatory environment found in the ACA and recent insights from the OIG, retailers may be able to expand their rewards programs to include purchases related to items covered by federal health care programs.  However, retailers must engage in careful analysis and planning to ensure that their rewards programs do not violate health care regulations.  Retailers interested in expanding their rewards programs, or making sure their current rewards programs comply with health care regulations, should seek the advice of an experienced health care attorney and consider obtaining an Advisory Opinion from the OIG based on the specifics of the proposed program.

© 2013 Michael P. James, J.D., M.B.A., CSSGB

Michael James provides representation and counseling related to all facets of business enterprise and healthcare matters. For more information, you can contact Michael at mjames@michaeljameslaw.com, (810) 936-4040 or www.michaeljameslaw.com.

Michigan Legislation to Create State-Based Health Exchange Fails

For the last several months, Michigan has been preparing to partner with the federal government to create a health exchange.  This month, Governor Snyder filed materials with the United States Department of Health and Human Services (“HHS”) to move forward with the partnership.  As part of this process, Michigan reserved its option to create a state-based health exchange.  However, it now appears that Michigan will not exercise this option and will continue to move forward with its partnership with HHS under the framework of a federally-facilitated exchange.

On Thursday, November 29th, pending legislation to create a state-based health exchange failed to gain necessary support from the state House Health Policy Committee.  Senate Bill 693, which was designed to create Michigan’s state-based health exchange called MI Health Marketplace, was defeated in committee on a 9-5 vote, with two abstentions.  Resistance to SB 693 was fueled by lingering, unanswered questions related to a health-based system, especially with respect to the future costs to Michigan taxpayers.

Despite Michigan’s election to form a partnership exchange with HHS, Michigan can still establish a state-based exchange to take over operations in 2015.

© 2012 Michael P. James, J.D., M.B.A., CSSGB

To find out more about the Michigan health exchange and the impact the Affordable Care Act has on health care, contact attorney Michael James at mjames@michaeljameslaw.com, 810-936-4040 or www.michaeljameslaw.com. Michael James provides representation and counseling related to all facets of business enterprise and healthcare matters.

Michigan to Partner with Federal Government to Create Health Exchange

In the three months following the Supreme Court’s decision upholding the constitutionality of the Affordable Care Act (ACA), states have been evaluating their options under the provisions of the Act.  One option involves the establishment of a health insurance exchange.  Health insurance exchanges are intended to be the vehicle through which millions of Americans will obtain health insurance as mandated by the ACA.  Under the ACA, each state may elect to establish an exchange to facilitate the purchase of health insurance coverage.  However, states are not required to do so.  If a state elects not to create its own exchange, a federally-facilitated exchange will be formed by the Department of Health and Human Services (HHS).  Federally-facilitated exchanges can be established directly by HHS or through a partnership with a non-profit entity.

To date, the states have been divided on what to do about the health exchanges.  Currently, sixteen states have announced that they will create their own, state-based exchanges.  Conversely, seven states have announced that they will take no action and let HHS directly establish a federal-facilitated exchange.  Four states have announced that they will create a partnership with HHS under the framework of a federally-facilitated exchange.   Twenty-three states remain undecided.

Michigan is one of the four states that intends to create a partnership with HHS for the establishment of a health exchange.  Because of the partnership, Michigan’s exchange will not be completely controlled by the federal government.  However, the federal government has not released many of the operational details of the federal exchange or the partnership option.  Here is what we know so far.

The operation of a health exchange will be broken down into twelve categories.  These categories are: 1) legal authority/regulation; 2) plan management; 3) eligibility and enrollment; 4) customer service; 5) finance and accounting; 6) oversight and monitoring; 7) SHOP; 8) risk adjustment and reinsurance; 9) human resources and organization; 10) technology; 11) privacy and security; and 12) contracting, outsourcing and agreements.  Under the partnership exchange model, Michigan will have limited responsibilities.  These responsibilities include plan management, the in-person component of customer service and a narrow role in eligibility and enrollment.  The scope and breadth of these responsibilities remain to be defined.

Because a federal partnership is still a federal exchange, HHS would ultimately sign off on all decisions, except those related to the few areas of authority retained by the states.  We do know that Michigan will be required to make changes to its business processes and IT systems.  The federal government will direct many of these changes, and Michigan may be financially obligated to support these changes.  Federal grant resources with no state match can still be used for the establishment of a federal partnership exchange.  Michigan officials are scheduled to meet with HHS officials next week to discuss in detail how the health exchange will be established and operated in Michigan.

At the state level, Michigan plans to create an entity called the MIHealth Marketplace (MIHM) to handle its responsibilities of the partnership.  Governor Snyder’s vision for MIHM is for it to be a non-profit corporation controlled by a board of directors.  The board of directors will likely consist of seven voting members, with the OFIR Commissioner to serve as an additional non-voting member.  Because of the exchange’s impact on Medicaid, Governor Snyder is also considering adding the Medicaid Director as a non-voting member.  An executive director will run the day-to-day operations of MIHM.  Governor Snyder’s plan also includes a large advisory board of various stakeholders including businesses, consumers, providers and other interested individuals to participate in MIHM decision-making.

Currently, Michigan has yet to enact legal authority for MIHM.  On September 30, 2012, Michigan must choose its Essential Health Benefit (EHB) package and submit it to HHS.  The EHB will determine plan benefits in both off and on exchange plans for individual and small group markets.  This decision will apply for 2014-15.  Despite Michigan’s election to form a partnership exchange with HHS, Michigan can still establish a state-based exchange to take over operations in 2015.  According to Steven Hilfinger, Chief Regulatory Officer, Director of the Michigan Department of Licensing and Regulatory Affairs, Michigan has focused on partnering with the federal government because of the deadlines involved in the exchange process.

The upcoming timeline of critical steps in the health care exchange process are as follows.  On November 16, 2012, Michigan must submit a letter from Governor Snyder that includes Michigan’s “blueprint” to the  federal government for exchange certification.  On January 1, 2013, the federal government must certify each state regarding its readiness to have an exchange operational by the “go live” deadline.  The “go live” deadline is October 1, 2013.  At this point, open enrollment begins.  On January 1, 2014, benefits of exchange plans begin, and on January 1, 2015, exchanges must be financially self-sustaining.

© 2012 Michael P. James, J.D., M.B.A., CSSGB

To find out more about the Michigan health exchange and the impact the Affordable Care Act has on health care, contact attorney Michael James at mjames@michaeljameslaw.com, 810-936-4040 or www.michaeljameslaw.com.  Michael James provides representation and counseling related to all facets of business enterprise and healthcare matters.

Accountable Care Organizations in Michigan

Learn about how accountable care organizations are changing health care in Michigan and across the country. Please do not hesitate to contact me should you have any questions or wish to discuss the impact of the Affordable Care Act on health care business and practice.

http://www.michbar.org/health/pdfs/aco.pdf

© 2012 Michael P. James, J.D., M.B.A., CSSGB

To find out more about the Affordable Care Act, contact attorney Michael James at mjames@michaeljameslaw.com, 810-936-4040 or www.michaeljameslaw.com.  Michael James provides representation and counseling related to all facets of business enterprise and healthcare matters.

New Requirements for Nursing Facilities Under the Affordable Care Act

Does your Skilled Nursing Facility (SNF) or Nursing Facility (NF) have a compliance program in place? Has your organization developed quality assurance practices? Are performance improvement metrics integrated throughout your operations? If your SNF or NF does not have or is not utilizing these programs, you may find yourself in violation of the Affordable Care Act (ACA) in the very near future. Under Section 6102 of the ACA, each SNF and NF is required to develop a compliance and ethics program and participate in a quality assurance and performance improvement program. These programs are consistent with the goals of the ACA to promote accountability for patient care and to redesign care processes to ensure high quality and efficient service delivery. Each of these programs are discussed in more detail below.

Compliance and Ethics Programs

Compliance and ethics programs are important part of the ACA. Under the ACA, each Medicare and/or Medicaid certified nursing facility must have in operation a compliance and ethics program three years after the effective date of the act. As such, the deadline to implement a compliance and ethics program is March 23, 2013.

According to the ACA, the programs must be effective in preventing and detecting criminal, civil, and administrative violations and in promoting quality of care. To accomplish these goals, the ACA outlines eight components required for a compliance and ethics program:

1. The organization must have established compliance standards and procedures to be followed by its employees and other agents that are reasonably capable of reducing the prospect of criminal, civil, and administrative violations.

2. Specific individuals within high-level personnel of the organization must have been assigned overall responsibility to oversee compliance with such standards and procedures and have sufficient resources and authority to assure such compliance.

3. The organization must have used due care not to delegate substantial discretionary authority to individuals whom the organization knew, or should have known through the exercise of due diligence, had a propensity to engage in criminal, civil, and administrative violations under the law.

4. The organization must have taken steps to communicate effectively its standards and procedures to all employees and other agents, such as by requiring participation in training programs or by disseminating publications that explain in a practical manner what is required.

5. The organization must have taken reasonable steps to achieve compliance with its standards, such as by utilizing monitoring and auditing systems reasonably designed to detect criminal, civil, and administrative violations under this Act by its employees and other agents and by having in place and publicizing a reporting system whereby employees and other agents could report violations by others within the organization without fear of retribution.

6. The standards must have been consistently enforced through appropriate disciplinary mechanisms, including, as appropriate, discipline of individuals responsible for the failure to detect an offense.

7. After an offense has been detected, the organization must have taken all reasonable steps to respond appropriately to the offense and to prevent further similar offenses, including repayment of any funds to which it was not entitled and any necessary modification to its program to prevent and detect criminal, civil, and administrative violations.

8. The organization must periodically undertake reassessment of its compliance program to identify changes necessary to reflect changes within the organization and its facilities.

Three years after the compliance programs are put into place, the United States Department of Health and Human Services (HHS) is required to evaluate the programs to determine the extent to which the programs have led to changes in deficiency citations and quality performance, and make a report to Congress.

The ACA required the Centers for Medicare and Medicaid Services (CMS) to issue regulations by March 23, 2012 related to nursing facility compliance plans. CMS did not meet this deadline. However, one should expect the regulations to be forthcoming given the Supreme Court’s recent decision upholding the constitutionality of the ACA. In the interim, the eight areas outlined above should be used by SNFs and NFs to structure compliance plans or modify existing compliance plans.

The requirements that will be imposed by the new regulations will likely vary with the size of the organization that operates the facility. The ACA states that:

Larger organizations should have a more formal program and include established written policies defining the standards and procedures to be followed by its employees. Such requirements may specifically apply to the corporate level management of multi-unit nursing home chains.

It should be noted that the Office of the Inspector General (OIG) has listed nursing facility compliance plans in its 2012 Work Plan. The 2012 Work Plan states:

We will review Medicare- and Medicaid-certified nursing homes’ implementation of compliance plans as part of their day-to-day operations and whether the plans contain elements identified in OIG’s compliance program guidance. We will assess whether CMS has incorporated compliance requirements into Requirements of Participation and oversees provider implementation of plans. Section 6102 of the Affordable Care Act requires nursing homes to operate a compliance and ethics program, containing at least 8 components, to prevent and detect criminal, civil, and administrative violations and promote quality of care. The Affordable Care Act requires CMS to issue regulations by 2012 and SNFs to have plans that meet such requirements on or after 2013.

The OIG has previously released compliance program guidance for nursing facilities. In the past, facilities may have viewed these OIG releases as optional. This is no longer the case. By putting nursing facility compliance plans in its 2012 Work Plan, the OIG appears to be prepared to enforce these guidance provisions. At a minimum a nursing facility’s compliance plan should meet the standards outlined in the OIG’s guidance releases.

Quality Assurance & Performance Improvement Programs

Section 6102 of the Affordable Care Act also requires HHS to establish and implement a quality assurance and performance improvement program (“QAPI program”) for facilities, including multi-unit chains of facilities. The ACA required that the regulations for the QAPI program be completed by December 31, 2011. Here too, it does not appear that CMS met this deadline. However, CMS’s webpage indicates that a national rollout of the QAPI program is set for summer 2012. Here, CMS will post early prototypes of some of the tools and resources it has been developing for the QAPI program. CMS states that this will be an opportunity for nursing facilities to try out these tools and provide feedback. The tools can be downloaded off of CMS’s website. Ultimately, it does not appear that the QAPI program will be fully operational this summer, as CMS is still in the testing and evaluation stage of the program. However, nursing facilities must be prepared to implement a QAPI program in the very near future. The five key elements discussed below should serve as a starting point to creating a QAPI program that will be compliant with the forthcoming federal regulations.

Under the ACA, the Secretary shall establish standards relating to quality assurance and performance improvement with respect to facilities and provide technical assistance to facilities on the development of best practices in order to meet such standards. As noted above, these regulations have not been completed. However, CMS has released guidance as to the five key elements of a QAPI. They are as follows:

1. Element 1: Design and Scope – A QAPI program must be ongoing and comprehensive, dealing with the full range of services offered by the facility, including the full range of departments. When fully implemented, the program should address clinical care, quality of life, resident choice, and care transitions. It aims for safety and high quality with all clinical interventions while emphasizing autonomy and choice in daily life for residents (or resident’s agents). It utilizes the best available evidence to define and measure goals. Nursing facilities will have in place a written QAPI plan adhering to these principles.

2. Element 2: Governance and Leadership – The governing body and/or administration of the nursing home develops and leads a QAPI program that involves leadership working with input from facility staff, as well as from residents and their families and/or representatives. The governing body assures the QAPI program is adequately resourced to conduct its work. This includes designating one or more persons to be accountable for QAPI; developing leadership and facility-wide training on QAPI; and ensuring staff time, equipment, and technical training as needed for QAPI. They are responsible for establishing policies to sustain the QAPI program despite changes in personnel and turnover. The governing body and executive leadership are also responsible for setting priorities for the QAPI program and building on the principles identified in the design and scope. The governing body and executive leadership are also responsible for setting expectations around safety, quality, rights, choice, and respect by balancing both a culture of safety and a culture of resident-centered rights and choice. The governing body ensures that while staff are held accountable, there exists an atmosphere in which staff are not punished for errors and do not fear retaliation for reporting quality concerns.

3. Element 3: Feedback, Data Systems and Monitoring – The facility puts in place systems to monitor care and services, drawing data from multiple sources. Feedback systems actively incorporate input from staff, residents, families, and others as appropriate. This element includes using Performance Indicators to monitor a wide range of care processes and outcomes, and reviewing findings against benchmarks and/or targets the facility has established for performance. It also includes tracking, investigating, and monitoring Adverse Events that must be investigated every time they occur, and action plans implemented to prevent recurrences.

4. Element 4: Performance Improvement Projects (PIPs) – The facility conducts Performance Improvement Projects (PIPs) to examine and improve care or services in areas that are identified as needing attention. A PIP project typically is a concentrated effort on a particular problem in one area of the facility or facility wide; it involves gathering information systematically to clarify issues or problems, and intervening for improvements. PIPs are selected in areas important and meaningful for the specific type and scope of services unique to each facility.

5. Element 5: Systematic Analysis and Systemic Action – The facility uses a systematic approach to determine when in-depth analysis is needed to fully understand the problem, its causes, and implications of a change. The facility uses a thorough and highly organized/ structured approach to determine whether and how identified problems may be caused or exacerbated by the way care and services are organized or delivered. Additionally, facilities will be expected to develop policies and procedures and demonstrate proficiency in the use of Root Cause Analysis. Systemic Actions look comprehensively across all involved systems to prevent future events and promote sustained improvement. This element includes a focus on continual learning and continuous improvement.

Not later than 1 year after the date on which the regulations are promulgated, a facility must submit to the Secretary a plan for the facility to meet such standards and implement such best practices, including how to coordinate the implementation of such plan with quality assessment and assurance activities conducted under sections 1819(b)(1)(B) and 1919(b)(1)(B), as applicable.

Ultimately, facilities should begin to create QAPI programs that are consistent with the elements released by CMS in advance of the federal regulations. Facilities should also consider downloading the prototype programs released by CMS this summer so that they are familiar with the direction CMS is taking and can prepare to be ahead of the curve.

Conclusion

Under the ACA, the regulatory environment for Skilled Nursing Facilities and Nursing Facilities has drastically changed. These changes will likely impact facilities’ policies, operations and management practices. Therefore, it is important that facilities take the appropriate steps to be ready for upcoming changes in the law under the ACA. In addition, facilities should currently have procedures in place consistent with the OIG’s guidance on compliance programs. Facilities should consult with experienced health care and business counsel in order to develop compliance, ethics, quality assurance and performance improvement programs.

© 2012 Michael P. James, J.D., M.B.A., CSSGB

To find out more about the changing regulatory environment for nursing facilities, contact attorney Michael James at mjames@michaeljameslaw.com, 810-936-4040 or www.michaeljameslaw.com. Michael James provides representation and counseling related to all facets of business enterprise and healthcare matters.

Mind the Gap: Supreme Court’s Affordable Care Act Decision Does Not Bridge the Gap of Potential Uninsured Patients for Hospitals and Health Systems

Although the Supreme Court upheld the constitutionality of the individual mandate of the Affordable Care Act (“ACA”), the ruling does not bridge the gap of potential uninsured patients for hospitals and health systems. Under the ACA, the individual mandate requires nearly all Americans to purchase and maintain health insurance. However, if an individual does not maintain health insurance, the only consequence is that he or she must make an additional payment to the IRS when paying his or her taxes. The failure to maintain insurance is not an unlawful act.

The practical question is this: Will people follow the individual mandate and maintain health insurance or will they elect to simply pay the amount owed to the IRS when filing their taxes? The Court notes that:

In 2016, individuals making $35,000 a year are expected to owe the IRS about $60 for any month in which they do not have health insurance. Someone with an annual income of $100,000 a year would likely owe about $200. The price of a qualifying insurance policy is projected to be around $400 per month.

Based on the Court’s example, the expected amount owed to the IRS is 50% to 85% less than the projected expense to purchase a qualifying insurance policy. Therefore, it is possible that healthy, young, low-risk individuals will choose to pay the IRS rather than an insurance carrier. It is also possible that the departure of these individuals from the market may increase insurance premiums for the remaining population that needs health insurance. Ultimately, this process could result in unanticipated levels of uninsured individuals.

The second part of the Court’s ruling was that the federal government cannot penalize the States for declining to participate in the expansion of the Medicaid program. Under the ACA, the Medicaid program will include coverage for all individuals under the age of 65 with incomes below 133% of the federal poverty level. However, because each State can decide whether or not to participate in the expanded coverage, it is unknown whether this category of individuals will be insured or uninsured. If the States elect not to participate in the expansion, it is likely that these individuals will be uninsured as they cannot typically afford the cost of insurance.

Ultimately, the rulings on both the individual mandate and the Medicaid program raise questions as to the level of uncompensated care that hospitals and health systems will continue to face in the wake of the Affordable Care Act. Hospitals and health systems should closely follow the legislative activity in the states where they operate to determine whether the Medicaid expansion is approved. In addition, hospitals and health systems should evaluate alternative methods to reduce expenditures. While there may be an influx in the number of insured individuals under the ACA, the cost of providing care to the uninsured will likely remain a prevalent part of providing care.

© 2012 Michael P. James, J.D., M.B.A., CSSGB

Michael James provides representation and counseling related to all facets of business enterprise and healthcare matters. For more information, you can contact Michael at mjames@michaeljameslaw.com, (810) 936-4040 or www.michaeljameslaw.com.

The Supreme Court Determines that States Cannot be Penalized for Declining to Participate in Medicaid Expansion under the Affordable Care Act

In a landmark decision, the Supreme Court upheld the constitutionality of the individual mandate of the Affordable Care Act (“ACA”), which requires nearly all Americans to purchase and maintain health insurance. However, an important component of the ACA was struck down as unconstitutional. Specifically, the Court determined that the federal government cannot penalize the States for declining to participate in the expansion of the Medicaid program.

Before the ACA, Medicaid provided coverage to seven categories of needy individuals: pregnant women, children, needy families, the blind, the elderly and the disabled. The ACA was designed, in part, to provide affordable health care to all Americans. As part of that goal, the ACA included an expansion of the Medicaid program to include all individuals under the age of 65 with incomes below 133% of the federal poverty level. Under the ACA, new Medicaid recipients would receive an essential health benefits package equivalent to the recipient’s obligations under the individual mandate, through 2016.

The ACA required that the States comply with the expansion of the Medicaid program or risk losing their Medicaid federal funding. This funding typically represents a sizable portion of a State’s overall budget. Although the Court acknowledged that Congress has the ability to attach appropriate conditions to federal taxing and spending programs, the Court believed that the ACA crossed the line between encouragement and coercion. The Court determined that the States could not have anticipated that Congress would transform the program so dramatically. As such, the Court believed that the financial inducement for the States’ compliance with Medicaid expansion under ACA was akin to “a gun to the head”. In essence, the States had no choice but to acquiesce to the expansion of the Medicaid program. Accordingly, the Court determined that incentivizing the States to comply with the Medicaid expansion by threatening to terminate their existing Medicaid funding was unconstitutional.

Ultimately, the Court ruled that Congress may offer funds under the ACA to expand the availability of health care and require that States accepting such funds comply with the conditions of their use. However, Congress is not free to penalize States that choose not to participate in the expansion of Medicaid by taking away their existing Medicaid funding. Based on the Court’s ruling, the States are free to decide whether or not to participate in the expansion of the Medicaid program. It is unknown how many States will elect to opt out of the expanded program. In light of the Court’s ruling, it is also unclear what action Congress may take to either modify the Medicaid expansion or offer the States options to phase in their participation.

I will actively monitor state and federal legislative activity related to the Court’s ruling and provide up-to-date coverage and analysis of any initiatives related to the Medicaid program.

© 2012 Michael P. James, J.D., M.B.A., CSSGB

Michael James provides representation and counseling related to all facets of business enterprise and healthcare matters. For more information, you can contact Michael at mjames@michaeljameslaw.com, (810) 936-4040 or www.michaeljameslaw.com.

Supreme Court Upholds Affordable Care Act

Today, the US Supreme Court issued a historic ruling, and upheld the Affordable Care Act, which became law on March 23, 2010. The ACA created sweeping reform to the health care system in the United States. The driving principles behind the ACA are to provide affordable health care to all Americans, reduce the growth of the health care costs and improve the health of our communities.

At the heart of the Court’s ruling was a determination that the individual mandate of the ACA is constitutional. The individual mandate requires nearly all Americans to purchase and maintain health insurance. The Court determined that the penalty associated with the individual mandate is a permissible tax that can be imposed by Congress under the taxing power.

The ACA required that states comply with new eligibility requirements for Medicaid or risk losing their federal funding. Specifically, the ACA expanded the Medicaid program from covering medical services for particular categories of vulnerable individuals to a program designed to meet the heath care needs of the entire non-elderly population with income below 133% of the poverty level. The Court determined that the States could hardly anticipate that Congress would transform the program so dramatically. As such, the Medicaid expansion violates the Constitution by threatening the States with the loss of their existing Medicaid funding if they decline to comply with the expansion. The Court’s solution to this issue was to strike down, as unconstitutional, the ability of the Secretary of Health and Human Services to withdraw existing Medicaid funds from a State that fails to comply with the requirements set out in the expansion.

Follow Business Law Analysis for continued coverage and analysis of the Supreme Court’s ruling.

© 2012 Michael P. James, J.D., M.B.A., CSSGB

Michael James provides representation and counseling related to all facets of business enterprise and healthcare matters. For more information, you can contact Michael at mjames@michaeljameslaw.com, (810) 936-4040 or www.michaeljameslaw.com.

U.S. Supreme Court to Decide Constitutionality of the Affordable Care Act

The Patient Protection and Affordable Care Act (“ACA”) became law on March 23, 2010. The ACA created sweeping reform to the health care system in the United States. The driving principles behind the ACA are to provide affordable health care to all Americans, reduce the growth of the health care costs and improve the health of our communities. While most agree that the underlying principles of the ACA are fundamentally sound, not everyone agrees with the methodology used to achieve these goals.

Opponents of the ACA have questioned the constitutionality of the law. Specifically, the challengers have argued that Congress does not have the authority to force Americans to buy health insurance. Under the “individual mandate” provision of the ACA, nearly all United States residents will be required to maintain a minimum monthly level of health insurance coverage beginning in 2014. If one fails to maintain the requisite coverage, he or she will be subject to a penalty that will be reflected in the individual’s federal tax return. Opponents believe that this penalty is nothing more than an impermissible tax that further invalidates the ACA.

Disputes involving the legality of the ACA have sprung up in federal courts across the country and have finally culminated before the United States Supreme Court. This week, the Supreme Court Justices heard an unprecedented three days of oral arguments regarding the constitutional issues potentially impacting the legality of the ACA. Today, the Justices will meet to decide the fate of the ACA. However, it will likely be several months before the Court’s decision is finalized in a formal written opinion. Until then, we are left to speculate about the outcome based on the Justices’ questions and comments during oral arguments.

Popular opinion about which direction the Supreme Court will lean has teeter beck and forth like a seesaw. Before the start of oral arguments, many believed that the individual mandate would withstand constitutional scrutiny. However, the nature and scope of the inquiries from the traditionally conservative portion of the Court coupled with the lackluster arguments advanced by the Obama administration’s lawyer have caused many to believe that the individual mandate may be in serious trouble. There is some consensus that Justice Kennedy’s vote will ultimately determine the fate of the ACA. Yet, there is no consensus about which side Justice Kennedy will ultimately support. This week’s oral arguments failed to shed light on Justice Kennedy’s position as his questions and comments seemed to acknowledge the legitimacy of positions advanced on both sides of this dispute.

I will continue to monitor the status of this important case. Once the Supreme Court’s opinion has been issued, I will provide an in-depth analysis of how the ruling impacts our health care system. In the interim, please do not hesitate to contact me regarding all of your health care law needs.

© 2012 Michael P. James, J.D., M.B.A., CSSGB

Michael James provides representation and counseling related to all facets of business enterprise and healthcare matters. For more information, you can contact Michael at mjames@michaeljameslaw.com, (810) 936-4040 or www.michaeljameslaw.com.