CRS Issue Statement on Health Care Reform

CRS Issue Statement on Health Care Reform

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CRS Issue Statement on Health Care Reform
Chris L. Peterson, Coordinator
Specialist in Health Care Financing
Erin D. Williams, Coordinator
Specialist in Public Health and Bioethics
April 6, 2010
Congressional Research Service
7-5700
www.crs.gov
IS40678
CRS Report for Congress
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repared for Members and Committees of Congress
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CRS Issue Statement on Health Care Reform

n March 23, 2010, President Obama signed health reform legislation into law—the
Patient Protection and Affordable Care Act (PPACA, P.L. 111-148), some provisions of
O which were amended by the Health Care and Education Reconciliation Act of 2010 (P.L.
111-152).
Regarding private health insurance, PPACA will be fully implemented in 2014, when most
individuals, large employers, and health plans are to meet certain coverage requirements. PPACA
will restructure the private health insurance market, particularly for individuals purchasing
coverage on their own (who may qualify for premium credits) and small businesses, partly by
supporting states’ creation of “American Health Benefit Exchanges” through which eligible
individuals and small businesses can access private insurers’ plans. Private health insurance
provisions that take effect prior to 2014 (including some this year) include the following: ending
lifetime and unreasonable annual limits on benefits, prohibiting rescissions of health insurance
policies, requiring coverage of preventive services and immunizations, extending dependant
coverage up to age 26, capping insurance companies’ non-medical administrative expenditures,
guaranteeing coverage for preexisting health conditions for enrollees under age 19, and providing
assistance for those who are uninsured because of a preexisting condition.
PPACA raises revenues to pay for expanded health insurance coverage by imposing excise taxes
and fees on industries in the health care sector, limiting tax-advantaged health accounts, and
increasing the Medicare payroll tax on upper-income households and adding an additional tax on
net investment income on upper-income households. The new laws will also eliminate the
deduction for expenses allocable to the Medicare Part D subsidy.
PPACA makes numerous changes to the Medicare program that will impact provider
reimbursements, provide incentives to increase the quality and efficiency of care, and enhance
certain Medicare benefits. For instance, major savings are expected from constraining Medicare’s
annual payment increases for certain providers, basing payment rates in the Medicare Advantage
program on average bids, reducing payments to hospitals that serve a large number of low-
income patients, and creating an independent Medicare Advisory Board to make changes in
Medicare payment rates. Other provisions in PPACA address more systemic issues such as
increasing the efficiency and quality of Medicare services, and strengthening program integrity.
For example, PPACA requires the establishment of a national, voluntary pilot program that
bundles payments for physician, hospital and post-acute care services with the goal of improving
patient care and reducing spending. Another provision adjusts payments to hospitals for
readmissions related to certain potentially preventable conditions. Additionally, PPACA increases
funding for anti-fraud activities, and subjects providers and suppliers to enhanced screening
before allowing them to participate in the Medicare program. PPACA also improves some
benefits provided to Medicare beneficiaries. For instance, Medicare prescription drug program
enrollees will receive a 50% discount off the price of brand name drugs during the coverage gap
(the “doughnut hole”) starting in 2011, and the coverage gap will be phased out by 2020. Other
provisions expand assistance for some low-income beneficiaries enrolled in the Medicare drug
program, and eliminate beneficiary copayments for certain preventive care services.
Beginning in 2014, or sooner at state option, nonelderly, non-pregnant individuals with income
below 133% of the federal poverty level (FPL) will be newly eligible for Medicaid. From 2014 to
2016, the federal government will cover 100% of the Medicaid costs of these newly eligible
individuals, with the percentage dropping to 90% (with states covering the difference) by 2020.
This change represents the most significant expansion of Medicaid eligibility in many years. In
addition, the health reform law adds new mandatory benefits to Medicaid, including, for example,
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CRS Issue Statement on Health Care Reform

coverage of services in free standing birthing centers and tobacco cessation services for pregnant
women. The new law also expands state options for providing home and community-based
services as an alternative to institutional care and provides financial incentives to states to do so.
Among the Medicaid financing changes, the health reform law reduces Medicaid disproportionate
share hospital (DSH) allotments, increases certain pharmacy reimbursements, increases primary
care physician payment rates for selected preventive services, and increases federal spending for
the territories.
The new law maintains the current structure of the State Children’s Health Insurance Program
(CHIP) and extends federal appropriations for two years, through FY2015. States will receive
higher federal matching rates for CHIP services beginning in FY2016 (if federal CHIP funds are
available). States are required to maintain CHIP eligibility levels through FY2019 as a condition
of receiving federal matching funds for Medicaid expenditures (notwithstanding the lack of
corresponding federal CHIP appropriations for FY2016 and beyond), with some exceptions.
Beginning in 2016, in the absence of additional federal allotments, CHIP children will obtain
coverage under Medicaid (if eligible) or in qualified health plans (with coverage and cost-sharing
protections comparable to CHIP currently) through the state-based exchanges.
PPACA includes numerous provisions intended to increase the primary care and public health
workforce, promote preventive services, and strengthen quality measurement, among other
things. It amends and expands many of the existing health workforce programs authorized under
Title VII (health professions) and Title VIII (nursing) of the Public Health Service Act (PHSA);
creates a Public Health Services Track to train health care professionals emphasizing team-based
service, public health, epidemiology, and emergency preparedness and response; and makes a
number of changes to the Medicare graduate medical education (GME) payments to teaching
hospitals, in part to encourage the training of more primary care physicians. The new law also
establishes a national commission to study projected health workforce needs.
In addition, PPACA creates an interagency council to promote healthy policies and prepare a
national prevention and health promotion strategy. It establishes a Prevention and Public Health
Fund to boost funding for prevention and pubic health, increases access to clinical preventive
services under Medicare and Medicaid, promotes healthier communities, and funds research on
optimizing the delivery of public health services. Funding also is provided for maternal and child
health services, including abstinence education and a new home visitation program. PPACA also
establishes a national strategy for quality improvement, creates an interagency working group to
advance quality efforts at the national level, develops a comprehensive repertoire of quality
measures, and formalizes processes for quality measure selection, endorsement, data collection
and public reporting of quality information. It creates and funds a new private, nonprofit
comparative effectiveness research institute.
Other key provisions in PPACA include programs to prevent elder abuse, neglect, and
exploitation; a new regulatory pathway for licensing biological drugs shown to be biosimilar or
interchangeable with a licensed biologic; new nutrition labeling requirements for chain restaurant
menus and vending machines; new requirements for the collection and reporting of health data by
race, ethnicity, and primary language to detect and monitor trends in health disparities; and
electronic format and data standards to improve the efficiency of administrative and financial
transactions between health care providers and health plans.

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CRS Issue Statement on Health Care Reform

Issue Team Members

Chris L. Peterson, Coordinator
Nancy Lee Jones
Specialist in Health Care Financing
Legislative Attorney
cpeterson@crs.loc.gov, 7-4681
njones@crs.loc.gov, 7-6976
Erin D. Williams, Coordinator
Janet Kinzer
Specialist in Public Health and Bioethics
Information Research Specialist
ewilliams@crs.loc.gov, 7-4897
jkinzer@crs.loc.gov, 7-7561
D. Andrew Austin
Marc Labonte
Analyst in Economic Policy
Specialist in Macroeconomic Policy
aaustin@crs.loc.gov, 7-6552
mlabonte@crs.loc.gov, 7-0640
Evelyne P. Baumrucker
Sarah A. Lister
Analyst in Health Care Financing
Specialist in Public Health and Epidemiology
ebaumrucker@crs.loc.gov, 7-8913
slister@crs.loc.gov, 7-7320
Cliff Binder
Paulette C. Morgan
Analyst in Health Care Financing
Specialist in Health Care Financing
cbinder@crs.loc.gov, 7-7965
pcmorgan@crs.loc.gov, 7-7317
Cynthia Brougher
Janemarie Mulvey
Legislative Attorney
Specialist in Aging Policy
cbrougher@crs.loc.gov, 7-9121
jmulvey@crs.loc.gov, 7-6928
Vanessa K. Burrows
Angela Napili
Legislative Attorney
Information Research Specialist
vburrows@crs.loc.gov, 7-0831
anapili@crs.loc.gov, 7-0135
Hinda Chaikind
Mark Newsom
Specialist in Health Care Financing
Analyst in Health Care Financing
hchaikind@crs.loc.gov, 7-7569
mnewsom@crs.loc.gov, 7-1686
Kirsten J. Colello
Carol Rapaport
Acting Section Research Manager
Analyst in Health Care Financing
kcolello@crs.loc.gov, 7-7839
crapaport@crs.loc.gov, 7-7329
Amalia K. Corby-Edwards
C. Stephen Redhead
Analyst in Health Services
Acting Section Research Manager
acorbyedwards@crs.loc.gov, 7-0423
credhead@crs.loc.gov, 7-2261
Patricia A. Davis
Bernice Reyes-Akinbileje
Specialist in Health Care Financing
Analyst in Health Resources and Services
pdavis@crs.loc.gov, 7-7362
breyes@crs.loc.gov, 7-2260
Barbara English
Amanda K. Sarata
Information Research Specialist
Specialist in Health Policy
benglish@crs.loc.gov, 7-1927
asarata@crs.loc.gov, 7-7641
Julie Stone
Jon O. Shimabukuro
Specialist in Health Care Financing
Legislative Attorney
jstone@crs.loc.gov, 7-1386
jshimabukuro@crs.loc.gov, 7-7990
Bernadette Fernandez
Jennifer Staman
Analyst in Health Care Financing
Legislative Attorney
bfernandez@crs.loc.gov, 7-0322
jstaman@crs.loc.gov, 7-2610
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CRS Issue Statement on Health Care Reform

Jane G. Gravelle
Holly Stockdale
Senior Specialist in Economic Policy
Analyst in Health Care Financing
jgravelle@crs.loc.gov, 7-7829
hstockdale@crs.loc.gov, 7-9553
Jim Hahn
Kathleen S. Swendiman
Analyst in Health Care Financing
Legislative Attorney
jhahn@crs.loc.gov, 7-4914
kswendiman@crs.loc.gov, 7-9105
Elayne J. Heisler
Susan Thaul
Analyst in Health Services
Specialist in Drug Safety and Effectiveness
eheisler@crs.loc.gov, 7-4453
sthaul@crs.loc.gov, 7-0562
Elicia J. Herz
Sibyl Tilson
Specialist in Health Care Financing
Specialist in Health Care Financing
eherz@crs.loc.gov, 7-1377
stilson@crs.loc.gov, 7-7368
Geoffrey J. Hoffman
Julie M. Whittaker
Analyst in Health Care Financing
Specialist in Income Security
ghoffman@crs.loc.gov, 7-0152
jwhittaker@crs.loc.gov, 7-2587

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