Other Policy Improvements

Improve the Fairness of Federal Funding for States.

States have been partners with the Federal government in creating a health care safety net for low-income and vulnerable populations.  They administer and share in the cost of Medicaid and the Children’s Health Insurance Program (CHIP).  The Senate bill created a nationwide Medicaid eligibility floor as a foundation for exchanges at $29,000 for a family of 4 (133% of poverty) – and provides financial support that varies by State to do so.

Relative to the Senate bill, the final health reform legislation replaces the variable State support in the Senate bill with uniform 100% Federal support for all States for newly eligible individuals from 2014 through 2016, 95% support for 2017, 94% support for 2018, 93% for 2019, and 90% for 2020 and subsequent years.  This approach resembles that in the House bill, which provided full support for all States for the first two years, and then 91% support thereafter.  The health reform legislation also recognizes the early investment that some States have made in helping the uninsured by expanding Medicaid to adults with income below 100% of poverty by increasing those States’ matching rate for the cost of childless adults.  It phases up the Federal matching payments so it is equal to that for the cost of newly eligible people by 2019  Health reform also provides additional assistance to the Territories by providing them with an additional $2 billion and the option to establish an Exchange.

Primary Care Payments Under Medicaid.
Health reform provides full Federal support to States to increase payments for Medicaid primary care services to Medicare rates in 2013 and 2014.

Adjusts Hospital and Other Payments:
Health reform lowers the reduction in Federal Medicare and Medicaid DSH payments by $4 billion over 10 years.  It changes the market basket productivity changes to that there is more time for facilities to adjust to them.  It changes the effective date for changes to physician-owned hospitals.  It adopts the House policies on 340B drug price access and Medicaid reformulations.  And, it increases the savings from imaging. 

Simplify Income Definitions.
Health reform seeks to simplify eligibility rules for various existing programs as well as for the new tax credits. Consistent with some of the policies in the House Proposal, the final legislation will conform income definitions to make the system simpler for beneficiaries to navigate and States and the Federal government to administer by: changing the definition of income used for assistance from modified gross income to modified adjusted gross income, which is easier to implement; creating a 5% income disregard for certain Medicaid eligibility determinations to ease the transition from States’ current use of income disregards; streamlining the income reconciliation process for determining tax credits and reduced cost sharing; and clarifying the tax treatment of employer contributions for adult dependent coverage.

Delay and Reform of Fees on Health Insurance Providers.
Like the drug industry, the health insurance industry stands to gain as more Americans get coverage.  The health reform legislation enacts an assessment on the industry beginning in 2014 to coincide with broader coverage provisions which will substantially expand the market for health insurance providers. It provides limited exemptions for plans that serve critical purposes for the community, including non-profits that receive more than 80 percent of their income from government programs targeting low-income or elderly  populations, or those with disabilities, as well as for voluntary employees’ beneficiary associations (VEBAs) that are not established by employers. The provision is estimated to raise $60 billion over 10 years.

Delay and Convert Fee on Medical Device Manufacturers to Excise Tax.
The medical device industry also stands to gain from expanding health insurance coverage.  Health reform includes an excise tax on certain medical devices that starts in 2013 to facilitate administration by the IRS and raises $20 billion over 10 years.

Protect the Social Security Trust Funds.
Health reform provides that, if necessary, funds will be transferred to the Social Security Trust Funds to ensure that they are held harmless by the legislation.

Ensure Effective Implementation.
The policy changes in health insurance reform will require careful, effective, deliberate, and transparent implementation.  The health reform legislation appropriates $1 billion for the Administration to implement health insurance reform policies.  It also delays several of the policies to ensure effective implementation and improve transitions: the therapeutic discovery credit, elimination of the deduction for expenses allocable to the Medicare Part D subsidy, the pharmaceutical and medical device industry fees, the health insurance industry fee and the Community First Choice Act.