Making Sense of
Healthcare Reform

Excerpts from a recent HMMC (www.hmmc.com) seminar presented by Andrew Van Ostrand, HIDA VP Policy and Research

Healthcare Reform Highlights

  • 32 million will have access to some form of insurance
  • Medicaid expansion, creation of insurance Exchange, premium subsidies, and subsidies to qualifying small businesses
  • Projected to cost $940 billion over ten years; reduce deficit by$143 billion
  • $420 billion in revenue through tax on high-cost insurance plans, Medicare cuts, penalty tax on employers and uninsured individuals, medical device tax
  • Individual insurance mandate / Employer shared responsibility

What does reform mean for:

Hospitals

Win

  • million in payments for “qualifying hospitals” in 2011-2012, located in traditionally low-cost Medicare service areas
  • New financial incentives and reporting requirements to ensure higher quality of care, reduce hospital readmissions, and decrease medical errors and HAIs
  • Uncompensated care provided by hospitals will decrease
  • Final legislation reduces DSH cuts

Loss

  • Hospitals agreed to billion in payment reductions and DSH cuts over ten years
  • May be subject to recommendations by Independent Medicare Advisory Board
  • Market basket update would be reduced 0.25% in FY10-11, 0.1% in FY12-13; conditional reduction of 0.2% FY14-19

Physicians

Win

  • Medicaid payments will be equal to Medicare in 2013-14 for primary care physicians
  • Medicare incentive payments to primary care physicians
  • General surgeons in professional health shortage areas eligible for bonus payments
  • Reallocation of vacant residency slots for states with doctor shortages
  • Increased grants and scholarship opportunities for primary care doctors

Loss

  • Primary care docs who see Medicaid patients will face a budget cliff in 2015
  • No permanent fix for SGR
  • Pilot program to bundle payment
  • Pilot program for tort reform

Extended Care

Win

  • No targeted reductions to the SNF market basket for 2010, 2011
  • Mandates a GAO study on the Five-Star Quality Rating System
  • Some funding for long term care facilities health IT investments
  • Creates a new Medicare, home-based attendant program for people with disabilities, reducing strain on nursing homes
  • CLASS Act creates new funding scheme for home- based, non-medical expenses

Loss

  • Expands DMEPOS Competitive Bidding Program
  • Expands the RAC audit program into Medicare part C and D
  • Reduces the SNF market basket update in 2012, requires additional background checks for SNF employees
  • Requires HHS to consider DME supplier volume when setting surety bond requirements/levels
  • Eliminates 2% payment rate increases included in Round 1 of competitive bidding

Manufacturers

Win

  • Newly insured population creates potential for additional business to be driven through the supply chain
  • Device registry requirements were left out of the final reform package

Loss

  • 2013, Manufacturers will have to report gifts and payments to physicians
  • 2.3% excise tax on medical devices, collected at first point of sale

Manufacturers

Win

  • Increased number of insured, and reduction of uncompensated care, may drive new business opportunities
  • 2.3% medical device excise tax is not directly collected at the Distributor level
  • Physician gift disclosure does not apply to medical products Distributors

Loss

  • Tax on the supply chain/ manufacturers may have indirect effects on the cost of products throughout the supply chain

Medical Device Excise Tax

  • Excise tax is to be paid by manufacturers when they sell a medical device at the point of first product sale –to an end user or a distributor
  • Class I device tax exemption was removed; narrow Class I exemptions remain for certain retail sales only
  • Tax rate was reduced to 2.3% from 2.9%, and collection will begin in 2013 instead of 2011
  • Federal government will see $20 billion in revenue from the tax, as opposed to $40 billion proposed initially

Medical Device Tax Advocacy : Distribution Impact

Physician Payments Sunshine Provision

  • Manufacturers of drug, device, biologics, and medical supplies covered under Medicare, Medicaid, or SCHIP must report payments made to physicians on an annual basis
  • Requires manufacturers to begin reporting gifts or payments worth more than $10 no later than March 31, 2013
  • Reports will be made publicly available online by HHS
  • About 12 states have or are considering gift disclosure requirements; new law does not preempt state reporting requirements

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