Healthcare 2013: Get Ready for a Wild Ride!

cedar-point-4With the impending blizzard ready to ruin, or at least significantly delay, one of my favorite holiday traditions – taking down the outside lights and decorations – this seems like a good time to throw another log on the Pub’s corner stove and set upon contemplating what’s just around the bend.  With implementation of the Affordable Care Act now ready to swing into full motion in 2013, might as well use this downtime to start preparing for the wild ride ahead.  So here are a few items on the horizon.

Fiscal Cliff Resolution
As written about here before, how Congress and the Administration resolve – or don’t – the Fiscal Cliff will significantly impact implementation of the Affordable Care Act in 2013.  Neither political party wants to risk being blamed for going over the cliff; yet neither wants to be blamed for, “giving in” on principles.  The resolution? Why, kick the can over Father Time’s head, landing squarely in Baby New Year’s lap once again, of course.  That means having temporary legislation in place to avoid the most feared short-term economic impacts (e.g., avoidance of broad income tax increases, extension of unemployment benefits and forestalling the nearly 30% reduction in Medicare payments to physicians).

Unfortunately, what it is does not mean is any real sense of stability or reliable framework for budgeting and appropriating funds.  Though funding for many of the ACA provisions was appropriated as part of the Act, the interconnected nature of the federal budget means that discretionary funding will still have a great impact on HHS departmental planning and implementation.

Further, it is likely that any meaningful and sustainable fiscal policy compromise will involve some legislative modification to the ACA – i.e., particularly in lieu of the need to control entitlement spending.  So until a long-term bargain can be reached there will continue to be a lot of uncertainty on the actual means, methods and timing regarding key provisions of the ACA.  Notwithstanding such uncertainty, below are a few of the more significant items that are supposed to be implemented in 2013.

Health Insurance Exchanges
Health Insurance Exchanges (HIEs) must be certified and operational by January 1, 2014.  A
t the latest count,  upwards of 30 states have opted not to establish health insurance exchanges on their own, which by default means the federal government will have to set up HIEs in those states.  While portions of the underlying technological and operational infrastructure can be duplicated from state to state, there is still an enormous implementation effort beyond what was anticipated.  Implementation will likely be delayed even with a fiscal agreement in place.  Likely too, will be modification to the Minimum Essential Benefits definition in lieu of projected exchange plan pricing.

The HIEs will get a lot of media attention in 2013 because of the direct impact they will have on millions of individuals and the lightening rod they are likely to become as a portended bell weather of ACA failure once implementation challenges and frustrations emerge.  At the same time, private insurance exchanges – seizing the opportunity to gain comparative perceptual market advantage – will flourish.

Medicaid Expansion
To be – or not to be – morally supportive of providing access to life saving healthcare to your poorest citizens, that is, as some have framed the debate over Medicaid expansion.  Effective January 1, 2014, Medicaid coverage is to be expanded to include individuals between the ages of 19 up to 65 (parents, and adults without dependent children) with incomes up to 138%  of the Federal Poverty Level (based on modified adjusted gross income).

More than likely, most states will find it politically unpalatable to opt out of the federal expansion once the dollars begin flowing out of Washington.  But as written here before, Medicaid coverage is a particularly sharp problem within a thicket of thorny policy challenges.  It behooves any healthcare provider with exposure to Medicaid (i.e., particularly those PA/LTC providers) to be very aggressive in staying informed regarding state Medicaid program policy developments over the next two years.

Medicare Bundled Payment Program
Payment bundling is perhaps one of the most confusing concepts in a sea of confusion that is healthcare policy because the concept both actively precedes and  transcends the ACA.  Pilot programs and demonstration projects testing whether paying multiple providers a lump sum to coordinate treatment and care of a patient for a defined condition and/or disease have been met with mixed results.  Still, provider enthusiasm to participate in such programs seems to be growing.

The difference in 2013 is that the ACA mandates CMS to begin a Medicare bundled payment pilot program to begin in January and run for five years.  The impetus of this initiative is try and drive broader, sustainable alignment across providers.  This is a voluntary program requiring application and must include a hospital, physician group, skilled nursing facility, and home health agency.  Only one entity (the contracting organization) will be responsible for allocating the payment among all providers.

To be sure, there will continue to be significant discussion, disagreement and controversy on the long-term viability of payment bundling, from both an economic and patient quality/safety perspective.  But from a more pragmatic, short-term financial vantage, providers interested in staying in business would do well to at least begin to understand what payment bundling will mean to them in the near future.

Tax Provisions in 2013
There are also a number of ACA revenue (i.e., tax) provisions that will take effect in 2013.  These include:

  • Itemized individual deductions threshold on medical expenses will go from 7.5% to 10% of AGI
  • New limit on flexible spending account for medial expenses will be set to $2,500 per year
  • Increase in Medicare Part A tax rate on wages goes from 0.9% to 2.35% on earnings over $200,000 for individuals and $250,000 for married couple filing jointly (plus a  3.8% assessment on unearned income of higher-income individuals)
  • Elimination of tax-deduction for employers receiving Medicare Part D retiree subsidy
  • Excise tax of 2.3% on the sale of taxable medical devices

    There are more provisions in 2013 worth knowing and understanding, and Kaiser’s Health Reform Source provides a sharp, interactive means of tracking these here.  Those mentioned above are just a few that should get immediate and highest priority as healthcare providers.


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