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Health Headlines - December 3, 2012

03 Dec 2012

CMS and OPM Issue Proposed Rules Governing Insurance Exchanges and Multi-State Plans – On Friday, CMS issued a proposed rule offering further details on the operations of the health insurance exchanges established under the health reform law (Exchanges) including the parameters related to the risk adjustment, reinsurance, and risk corridors programs.   Of particular note, CMS proposed to impose on insurers participating in a Federally-facilitated exchange a fee of 3.5% of premiums collected.  On the same day, the Office of Personnel Management (OPM) issued a proposed rule, to implement the Multi-State Plan Program (MSPP) under which OPM contracts with private health insurance issuers to offer at least two multi-State plans on each of the State Exchanges.  These multi-State plans (MSPs) are intended to “foster competition among plans competing in the individual and small group health insurance markets.”  Per OPM’s proposal, MSPP issuers will not have to cover all 50 States immediately but will instead have the option of phasing coverage in starting with at least 31 States in its first year and covering all States by its fourth year.  In addition, the MSPs can offer a benefits package that either follows a State's essential health benefit (EHB) benchmark plan for the State in which it is operating or any EHB benchmark chosen by OPM that is based on one of the three largest federal employee health plan options. 

Of the many proposals issued Friday, the one that garnered the most attention was CMS’s proposal to impose a 3.5% “user fee” on insurers that wish to participate in a Federally-facilitated Exchange to help defer CMS’s administrative costs.  In particular, CMS proposed “a monthly user fee rate equal to 3.5 percent of the monthly premium charged by the issuer for a particular policy under the plan.”  The Associated Press reported that “critics of the law were quick to point out” that the “proposed administrative fee in the new exchanges would be higher than the 2 percent to 3 percent overhead commonly cited for running Medicare.” The insurance industry warned that the fees could increase costs to consumers while CMS countered that insurers will benefit in various ways from selling their policies through the Exchanges.

In addition to the 3.5% user fee, CMS also offered further detail and parameters related to: the risk adjustment, reinsurance, and risk corridors programs; cost-sharing reductions; advance payments of the premium tax credit; a Federally-facilitated Small Business Health Option Program; and the medical loss ratio program. According to CMS, “[t]he cost-sharing reductions and advanced payments of the premium tax credit, combined with new insurance market reforms, will significantly increase the number of individuals with health insurance coverage, particularly in the individual market.”  In addition, “[t]he premium stabilization programs – risk adjustment, reinsurance, and risk corridors – will protect against adverse selection in the newly enrolled population.” 

Reporter, Daniel J. Hettich, Washington, D.C., +1 202 626 9128,

CMS Releases Memorandum and Tool for Assessing Health Plans Seeking Participation in the Massachusetts Dual-Eligibles Capitation Demonstration Program – On November 28, 2012, CMS released a memorandum directed at health plans selected as Medicare-Medicaid plans (MMPs) in state dual-eligible demonstration programs adopting a capitated financial model.  Twenty-six states have submitted proposals to CMS to operate dual-eligible demonstration programs under the Financial Alignment Demonstration.  The capitated model is one of two possible program models under the Financial Alignment Demonstration; the other model type is a managed fee for service model.  Thus far, CMS has entered into a Memorandum of Understanding with Massachusetts and with Washington following approval of their proposals.  Massachusetts has the only approved capitated financial model thus far.

Under the capitated financial model, CMS and the state will contract with MMPs to manage and provide care to dual-eligibles enrolled in the demonstration program for a capitated per member per month fee.  CMS’s memorandum describes generally the “multi-pronged oversight strategy for MMPs.”  CMS explains that it will require plans to meet the core Medicare, Medicaid, state procurement and insurance requirements.  CMS and the state will conduct readiness reviews of selected MMPs prior to the start of each capitated financial model demonstration in order to assess the MMP’s “operational capacity and ability to offer high-quality, coordinated care while adhering to all federal and State requirements.”  All readiness reviews will include a network validation review and a desk review, but some MMPs will be selected for an additional site visit.  CMS also plans to conduct implementation monitoring prior to the first enrollment and during the implementation process as well as ongoing monitoring throughout the demonstration program. 

According to CMS, each state-specific readiness review tool will be completed once the state and CMS have signed a Memorandum of Understanding.  CMS enclosed Massachusetts’ Readiness Review Plan (“the Massachusetts Plan”) with the November 28 memorandum.  According to CMS, the Massachusetts Plan is tailored to the state-approved demonstration’s requirements on MMPs and target population.  Nonetheless, the Massachusetts Plan addresses all of the key areas that CMS maintains will be included all state readiness review tools.  Therefore, health plans seeking to participate in capitated demonstration programs in other states can use the Massachusetts Plan to understand CMS’s expectations.  Review focuses on key areas impacting beneficiary access to services, including assessment processes, care coordination, provider network, staffing, enrollee protections and systems (such as claims, enrollment, payment, etc.). 

Click here to view a copy of CMS’s memorandum and the Massachusetts Readiness Review Plan.

Reporter, Kate Stern, Atlanta, +1 404 572 4661,

Deadline for Submission of Revised Wage Index Data Extended to December 10 – CMS has extended the deadline for all hospitals to request revisions to their wage data and occupational mix data to December 10, 2012.  Medicare administrative contractors/fiscal intermediaries must receive the revision requests and supporting documentation by this date.  The deadline, which previously was December 3, 2012, was extended because the data for many providers was omitted from the FY 2014 preliminary public use files (PUFs) released by CMS on October 3, 2012.  CMS has supplemented the PUFs “to the best of [their] ability” in response to provider inquiries.  CMS has added two additional tabs with provider data previously not included in the October preliminary PUF: 1) for providers that filed on the CMS Form 2552-96 cost report; and 2) for those that filed on the CMS Form 2552-10 cost reports.  CMS notes that it still could not include data of some providers due to technical difficulties with the CMS Form 2552-10 cost reports.  Hospitals affected by Hurricane Sandy should contact their Medicare contractor if they are having trouble meeting the December 10, 2012 deadline. 

Click here for additional information available at the CMS website.

Reporter, Christina A. Gonzalez, Houston, +1 713 276 7340,

CMS Announces $532 Medicare Enrollment Fee for 2013 – CMS announced a $532 application fee for calendar year (CY) 2013 for institutional providers that are initially enrolling in the Medicare, Medicaid, or CHIP programs, revalidating their Medicare, Medicaid or CHIP enrollment, or adding a new Medicare practice location. This fee, which is an increase of $9 from the prior year fee of $523, will be required with any enrollment application submitted on or after January 1, 2013 and on or before December 31, 2013. 

Reporter, Daniel J. Hettich, Washington, D.C., +1 202 626 9128,

OIG Recommends Additional Oversight of EHR Incentive Programs – A November 29, 2012 report from the HHS Office of Inspector General (OIG) sets forth several recommendations to improve CMS’s oversight of the Medicare and Medicaid EHR Incentive Programs.  Specifically, the report expresses concern that CMS does not employ any methodology to ensure the accuracy of meaningful use data submitted by eligible providers during the attestation process, and that CMS’s current practice of targeted post-payment review is not sufficient to ensure that incentive payments are being properly paid.

In preparation of its report, OIG reviewed the meaningful use data submitted to CMS by eligible providers who received incentive payments.  (OIG reviewed only data contained in CMS’s EHR Incentive Program database, and did not request documentation directly from eligible providers.)  While OIG found that the data submitted by meaningful users satisfied specific meaningful use measures, OIG found that CMS has no safeguards to verify the accuracy of that data prior to paying incentives. 

Though the report acknowledges that CMS is not required by the HITECH Act to conduct prepayment review, OIG nonetheless recommends that “CMS should direct selected high-risk [eligible] professionals and hospitals to submit documentation supporting their self-reported meaningful use information for prepayment review.”  OIG does not define a “high-risk” eligible provider, but recommends using the same criteria CMS plans to use for selecting providers for post-payment review.

OIG is also critical of the documentation sources CMS has indicated it will examine during post-payment review.  For percentage-based measures, CMS plans to audit reports generated by an eligible provider’s certified EHR to verify that the numerators and denominators submitted for attestation are accurate.  However, OIG notes that these reports may be inaccurate if the relevant encounter data was inaccurately entered into the EHR.  For other measures, such as verifying that an eligible provider has enabled drug-drug and drug-allergy interaction checks, CMS has indicated it will accept a screen shot of the EHR that indicates the provider has actually enabled the checks.  The report contends, however, that screen shots only show what checks a provider has enabled at a given moment in time, and do not verify that the checks were enabled during the entire reporting period.  OIG recommends that CMS issue detailed instructions to providers regarding documentation sources that will verify meaningful use data for all measures.

The OIG report is available by clicking here.

Reporter, Christopher Kenny, Washington, D.C., +1 202 626 9253,

This bulletin provides a general summary of recent legal developments. It is not intended to be and should not be relied upon as legal advice.

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