House Substitute for S.B. 11
SUMMARY OF PROVISIONS
An analysis by Sarah Carkhuff Fizell of the Kansas Health Institute
SECTION 1 MEDICAID REFORM
SB 11 provides that the Kansas Health Policy Authority (KHPA) will research, evaluate, and present Medicaid reform options on or before November 1 to the Legislature for enactment during the 2008 legislative session.
SECTION 2
HEALTH ‘ INSURANCE REFORM
These reform options need to address four goals:
1.
Financing health care and health promotion in a manner that is equitable, seamless, and sustainable for consumers, providers, purchasers, and government;
2.
Promoting market-based solutions that encourage fiscal and individual responsibility;
3.
Protecting the health care safety net in the development of such options; and
4.
Facilitate purchasing of health insurance, and facilitating access to private sector health insurance by small businesses and individuals.
The policies put into place should be designed to increase portability, increase individual ownership of health care policies, utilize pre-tax dollars for purchase of insurance, and expand individual responsibility for making health-related decisions. This legislation requires that this proposal include various reform options, including analysis of a connector model as well as draft legislation for other financing reform options.
Before any reform that addresses these main goals is presented to the Legislature, the following entities are charged with completing the following tasks:
KHPA is charged with evaluating:
1.
Economic impact on the state;
2.
Number of currently uninsured individuals who would receive coverage through the reforms;
3.
Potential public funding sources (including Medicaid);
4.
In collaboration with HHS, the feasibility of Section 1115 waivers under the DRA as well as under the Federal Health Insurance Flexibility and Accountability Demonstration Initiative;
5.
In collaboration with the Kansas Insurance Department, the potential for reinsurance and state subsidies to reduce premium volatility; and
6.
In collaboration with the Kansas Insurance Department, investigate other policy changes that address market competition, affordability, and portability.
A legislative interim committee will be appointed to study various tax credit options in order to enable the purchase of long-term care insurance, health earned income tax credits, health insurance, and health savings accounts.
With regard to Medicaid and SCHIP programs, KHPA is tasked with coordinating health care planning, administration, and purchasing. It also is tasked with analyzing health data with respect to these programs. KHPA will not be responsible for this with regard to the Mental Health Reform Act, the Developmental Disabilities Reform Act, the Mental Health Program of the State of Kansas, or addiction and prevention services.
SECTION 3
EXTENSION OF STATE CONTINUATION OF BENEFITS
A study would be undertaken by the Kansas Insurance Department to assess the impact of extending state continuation of benefits from 6 months to 18 months. The bill mentions “extending continuation of benefits under COBRA” but this extension refers more accurately to the Kansas Continuation Law, which is part of K.S.A. 40-2209. The Kansas Continuation Laws pertain to individuals who do not qualify under COBRA benefits continuation and was established as a part of state insurance statute prior to the existence of COBRA.
SECTION 4
PREMIUM ASSISTANCE
SB 11 puts into place a phased-in plan to over four years cover Kansas adults who earn at or below 100% of the Federal Poverty Line (FPL). That plan is as follows:
Year 1-2:
Everyone under 50% of FPL becomes eligible ($10,325 for a family of 4).
Year 3:
Everyone under 75% of FPL becomes eligible ($15,488 for a
family of 4).
Year 4:
Everyone under 100% of FPL becomes eligible ($20,650 for a family of 4).
The bill does not include funding for the premium assistance. A separate budget bill provided some funding to cover administrative costs to prepare for implementing the plan.
SECTIONS 5-11
SAFETY NET FUNDING
This legislation also establishes the Primary Care Safety Net Clinic Capital Loan Guarantee Act. This authorizes the Secretary of KDHE to enter into agreements with safety net clinics and financial institutions to provide capital loans for capacity expansion, and facilities upgrades at the safety net clinics. To qualify for these loans, the clinic must offer a sliding fee discount for health care and other services and must serve all persons regardless of ability to pay. The bill establishes a Primary Care Safety Net Clinic Loan Guarantee Fund in the state treasury that will be subject to appropriations. The guarantee fund will be required to submit an annual report that details all activity under this provision, which will contain information about new loans, loan repayment status, and other pertinent information.
SECTION 12
THIRD PARTY LIABILITY
Health insurers, plans and other third parties are not allowed to take Medicaid eligibility into account when processing claims or providing services and are required to provide information that facilitates a Kansas Health Policy Authority determination of coverage/eligibility. This section also requires third parties to accept the state Medicaid agency”s right of recovery, respond to any inquiry by KHPA no later than three years after the date of service, and agree to not deny claims based on type or date of submission or failure to present proper documentation at the time of service.
SECTION 13
GRANTS FOR ESTABLISHMENT OF CAFETERIA PLANS
This section establishes the Small Employer Cafeteria Plan Development Program. It will make grants available to small businesses to defray start-up costs associated with the creation of pre-tax contribution plans that fall under the scope of 26 U.S.C. 125, known as “cafeteria plans.” Additionally, this section includes requires the secretary of commerce to develop marketing strategies to promote awareness of the existence and benefit of these plans. These grants will not be available to small employers who already have plans in place and will be available until July 1, 2009.
SECTION 14
ASSOCIATION HEALTH PLANS
This section establishes the Association Assistance Plan Fund. Grants will be available to finance the formation and organization of associations to assist members with obtaining quality affordable health plans, known commonly as Association Health Plans (AHPs). These grants can be used to undertake feasibility studies or actuarial analysis as well as to defray any setup costs associated with the creation of AHPs.
SECTION 15
ESTABLISH OFFICE OF INSPECTOR GENERAL
As defined in this section, the function of an inspector general is to “establish a full-time program of audit, investigation, and performance review to provide increased accountability, integrity, and oversight of the state Medicaid program, the state MediKan program and the State Children”s Health Insurance Program.” The main function of the inspector general, who will be appointed by the Kansas Health Policy Authority board and confirmed by the Senate, will assist in improving agency and program operations as well as deterring and identifying fraud, waste, abuse and illegal acts. The IG will also be responsible for conducting investigations, audits, evaluations, and other reviews.
ADDITIONAL PROVISIONS ADDED DURING
CONFERENCE COMMITTEE
CANCER REGISTRY
This provision enables the Secretary of KDHE to authorize the use of confidential data in the cancer registry for public health purposes. There are many states that have cancer registries. These systems are designed to collect, analyze, and manage data regarding cancer. Cancer registries were established by Congress in 1992 through the Cancer Registries Act and are administered by the Centers for Disease Control and Prevention.
UMBILICAL CORD DONATION ACT
This provision requires health care providers to provide information about umbilical cord donation during the third trimester of pregnancy. It also requires that KDHE make available on its Website information about the process and risks involved, uses and benefits, associated costs, and options for ownership of the donated materials. Umbilical “cord blood” contains stem cells, providing an alternative source to embryonic stem cells. There is hope that these cells can be used much like other donated tissues and blood.
INFORMAL DISPUTE RESOLUTION
This act enables facilities that fall under the oversight of the Centers for Medicaid and Medicare Services (CMS) such as a medical care facility, adult care home, or assisted living facility, to dispute any problems discovered during an inspection by the state fire marshall. These facilities can make a request for an informal dispute resolution within ten calendar days of the time that they receive notice of issues within that facility, and one request can be made per inspection.
PHYSICAL THERAPY
This bill amends existing statutes and enables physical therapists (PTs) to initiate treatment without approval from a physician or other licensed practitioner under certain circumstances. This bill does not alter the current requirement for referral in all other circumstances. The bill will also authorize PTs to: provide education and instruction related to workplace injury; fitness, health promotion, and education to the public; PT services to special education students with the intent to fulfill individualized education or family service plans.
NEWBORN SCREENING
This bill enables KDHE to require newborn screening tests for disorders recommended in a report by the American College of Medical Genetics, and requires the Secretary of KDHE to appoint an advisory committee to guide implementation of the program.
Kansas currently requires seven screenings. The bill expands the number of disorders for which infants will be screened to 29.
ADULT CARE HOME ADMINISTRATORS
This bill allows the Board of Adult Care Home Administrators to grant a license to an individual who already is licensed in another state provided that a series of requirements are met, including that the license previously held by the individual is adequate, that the license has been maintained by the individual continuously and that no disciplinary action has been taken against that individual.
PHARMACY ACT AMENDMENTS
This bill allows pharmacists and pharmacy students to administer vaccines to persons under age 18. It also creates separate requirements for an individual to be a registered distributor of durable medical equipment versus a wholesale drug distributor. “Wholesale distributors” are defined as “persons who engage in wholesale distribution of prescription drugs or devices.” This bill essentially excludes individuals engaged in the sale of durable medical equipment from this definition. Durable medical equipment includes such items as wheelchairs, walkers, and hospital beds.
DEFINITIONS AND BACKGROUND
CONNECTOR: The idea of an insurance “connector” stems from its inclusion as a key element of Massachusetts” health reform law. The connector functions as a clearinghouse for insurance “shopping” as well as payments
allowing individuals and businesses to have one uniform place to conduct all insurance-related transactions. In addition to offering coverage for individuals who are unemployed, not qualified under their employer plan, or are self-employed, small employers can also utilize the connector in order to obtain coverage for their employees. The connector model addresses portability by allowing employees to keep the same plan even if they change employers, addresses cost by setting premium subsidy levels, and defines “affordability” for purposes of the individual mandate.
PORTABILITY: Most commonly, portability is referred to in the context of the Health Insurance Portability and Accountability Act, or HIPAA, which was enacted by Congress in 1996 and addresses portability and privacy issues relative to health care and health information. Portability is important because, if an individual changes jobs often or is in a situation where they are not consistently insured, it usually means that their benefits are not consistent which poses a problem with regard to their “medical home” as well as their knowledge of what benefits are available to them. This is significant because people whose benefits change frequently, or are unsure of what benefits are available to them, are less likely to seek preventive care, resulting in more trips to the emergency room and higher overall costs.
HHS
DEPARTMENT OF HEALTH ‘ HUMAN SERVICES: HHS is the principal agency in the U.S. tasked with providing essential services to and protecting the health of all Americans. HHS encompasses more than 300 programs, including Medicare and Medicaid. HHS maintains a staff of 66,121 employees and has a budget of $698 billion (FY07). HHS works very closely with the Social Security Administration to oversee and administer the Medicare program. (HHS website.)
SECTION 1115 WAIVERS: Section 1115 of the Social Security Act provides the freedom for the Secretary of HHS to authorize experimental, pilot, or demonstration projects. Section 1115 waivers allow states to “pilot” new ideas of policy merit which have not been demonstrated broadly, which can include expansion of eligibility or services or can test new delivery systems. These waivers are generally approved in 5-year increments and must be “budget neutral.”
There is no standard application process to get a Section 1115 waiver, but favorable proposals almost always include a discussion about financing, the number of affected individuals, time frames for implementation, and eligibility. CMS has no specified time frame in which to approve or deny these requests and approval may be subject to additional requirements. CMS generally develops terms and conditions upon which Section 1115 waivers are granted when approval is given.
DRA
DEFICIT REDUCTION ACT: The Deficit Reduction Act was signed by President Bush in February of 2006, and is intended to reduce federal Medicaid spending by $6.9 billion over next five years. The DRA made changes in many areas such as prescription drugs, premium- and cost-sharing rules, long-term care reform, and citizenship documentation requirements. Until the passage of the DRA, each was required to offer uniform benefits to all Medicaid enrollees within that state. The DRA gave states authority to apply for Section 1115 waivers (see above), which give flexibility to provide different benefits to different groups. Such waivers also provide states the opportunity to use premiums and cost-sharing mechanisms to keep costs down. Without flexibility provided by the DRA, some of the reforms mentioned in this bill would not be possible. (KFF)
REINSURANCE: Reinsurance helps to distribute costs from smaller groups and individuals more broadly. Because it is difficult to predict the costs within small groups and for individuals, premiums for these groups can fluctuate greatly. By utilizing reinsurance, an insurer can pass some of the risk for several small groups and individuals on to a reinsurer, which helps to stabilize the costs.
TAX CREDITS: A tax credit is given to individuals based on income so whatever they spend on an individual policy is then deducted from the taxes that are owed. If an individual does not owe taxes, a refund is paid.
EITC
EARNED INCOME TAX CREDITS: An EITC eliminates or reduces the taxes that low-income working people pay and, in some cases, can operate similarly to a wage subsidy. Over the years, the EITC has been increased and now stands as one of the largest anti-poverty tools available in the U.S.
HSAs
HEALTH SAVINGS ACCOUNTS: HSAs were established as a part of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA). This is the same legislation that resulted in massive changes to the Medicare Part D Prescription Drug Plan. HSAs are available to individuals enrolled in high-deductible health plans and are intended to help save money on a pre-tax basis so that there is money available to meet the out-of-pocket expenses associated with high-deductible plans. Money placed into these accounts can only be used for qualified medical expenses.
These plans have been controversial as they are said by critics to only benefit a younger and healthier subset of the population, which makes coverage more expensive for everyone. It is generally understood that older and/or less healthy individuals are more likely to pay a higher premium for better insurance coverage whereas younger and healthier individuals are more likely to choose a plan with a lower premium, a higher deductible and less comprehensive coverage. When this happens, insurers experience something called “adverse selection” which can be highly detrimental to underwriting practices
causing premiums to rise for the older and less healthy, which then causes them to be unable to afford the coverage. The end result is a group of insured individuals who are the most expensive population to insure.
MEDICAID: Created on July 30, 1965, Medicaid is Title XIX of the Social Security Act. The program is jointly funded by the federal government and the states and is monitored by the Centers for Medicare and Medicaid Services (CMS; a division of HHS). Medicaid is the largest insurer in the United States and provides health coverage to low-income children, parents, seniors, and people with disabilities, insuring 68 million individuals.
SCHIP
STATE CHILDREN”S HEALTH INSURANCE PROGRAM: SCHIP was created in 1997 and was the largest expansion of health coverage in the U.S. since Medicaid was enacted in 1965. SCHIP is a national program that is designed to “catch” families who make too much money to qualify for Medicaid but cannot afford to purchase private insurance. Sates receive enhanced federal funding for SCHIP, but SCHIP may still be operated separately from Medicaid.
COBRA
CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT: COBRA is part of the Employee Retirement and Income Security Act
better known as ERISA
which was enacted in 1986 and is a federal law relating to labor issues, not specifically to insurance law. COBRA provides 18 months of benefits continuation for individuals in a qualifying plan. Most large employers who do not have self-funded health plans are subject to ERISA.
FEDERAL POVERTY LINE: This is a measure used to determine eligibility for federal and state programs that are administered on a basis of need.
HHS defines a person as being “low income” if their family”s taxable income for the preceding year did not exceed 150 percent of the FPL ($25,755 for a family of 3). Currently, Kansas Medicaid is only available to people who fall under 37% of the FPL, which is one of the strictest thresholds in the nation.
THIRD PARTIES: A third party is any entity that is responsible for claims payments. This can include (but is not limited to) health insurers, self-insured plans, group health plans, service benefit plans, and managed care organizations.
CAFETERIA PLANS: These plans were established by Section 125 of the Internal Revenue Code, and are therefore also called Section 125 Plans. These plans allow employees to deduct money on a pre-tax basis and use those funds to purchase a wide variety of benefits
hence the reason they are referred to as “cafeteria plans.” Most plans are operated through a “salary reduction agreement” which means that a certain amount of each paycheck is deducted and is used to reimburse health-related expenses as prescribed in the plan agreement. Benefits can vary, but generally all medical expenses and over-the-counter medications are covered under these plans.
ASSOCIATION HEALTH PLANS (AHPs): The Small Business Fairness Act of 2003 allows businesses to offer these plans
which are federally licensed and are exempt from state insurance regulation. Some proponents of these plans say that they are good because they offer an option for small businesses who otherwise could not afford coverage for their employees. Critics of AHPs include the insurance industry, state regulators, and consumer advocates. They oppose these types of plans because: they have the potential to attract healthier groups, which can cause adverse selection and make insurance more expensive for other groups; they are not regulated and therefore are susceptible to insolvency and fraud; and have the potential to contain insufficient benefits as well as fewer protections for patients.
HEALTH OPPORTUNITY ACCOUNTS: Similar to HSAs, Health Opportunity Accounts are tax-favored accounts, but HOAs are established for Medicaid beneficiaries. These accounts are of concern because they require Medicaid beneficiaries to meet a large deductible before they have access to Medicaid services. States would make contributions to these accounts but would not be required to fully offset the amount of the deductible, which means that if a beneficiary spends all of the money in their account, they could still have significant out of pocket costs which could discourage their use of medically necessary services. There are many who argue that these plans are more expensive for two main reasons: if an individual ceases to be eligible for Medicaid, that individual is allowed to keep 75% of the money left in the account; and the program permits provider reimbursement at a higher rate than the state Medicaid program. It is expected that the program, which operates in 10 states for the first five years will result in a $60 million increase in Medicaid spending. After the first five years, the program will be extended nationwide, and is expected to cost $205 million in the second five years.