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Tuesday, June 29, 2010

Self-Insured Health Insurance Coverage

Bernadette Fernandez
Analyst in Health Care Financing


Private health insurance can be provided to groups of people that are drawn together by an employer or other organization. Such groups are generally formed for some purpose other than obtaining insurance, like employment. When insurance is provided to a group, it is referred to as "group coverage" or "group insurance." A common distinction made between private health coverage offered to groups is how such coverage is funded. That is, the plan sponsor may either purchase group health insurance from a state-licensed insurance carrier, or fund the health benefits directly. The former refers to fully insured plans; the latter, self-insured plans. 

Self-insurance refers to coverage that is provided by the organization seeking coverage for its members. Such organizations set aside funds and pay for health benefits directly. (Enrollees may still be charged a premium.) Under self-insurance, the organization itself bears the risk for covering medical expenses. Because self-insured plans are not purchased from an insurance carrier licensed by the state, they are exempt from state requirements and subject only to federal regulation. With fully insured plans, the insurance carrier charges the plan sponsor a fee for providing coverage for the benefits specified in the insurance contract. The fee typically is in the form of a monthly premium. (In turn, the sponsor may decide that each person or family who wishes to enroll must pay part of the premium cost.) Under the fully insured scenario, the private insurer bears the insurance risk; that is, the insurer is responsible for covering the applicable costs associated with covered benefits. Insurance purchased from a state-licensed insurer is subject to both federal and state regulation. 

A majority of individuals with private health insurance coverage are enrolled in self-insured plans. In 2008, 55% of private-sector enrollees were in such plans. This proportion differs when comparing small firms and large firms. In 2008, of the private-sector workers who were employed at small firms with health coverage, 12% were enrolled in self-insured health plans. In contrast, of private-sector workers employed at large firms, 65% were enrolled in self-insured plans. Consistent with these findings is the share of private-sector firms that offer at least one self-insured plan. In 2008, while 34% of all private-sector firms that offered insurance had at least one self-insured plan, only 13% of small firms had such a plan, compared with 63% of large firms. 

To assist individuals, families, and employers in obtaining health coverage, the 111th Congress passed major health reform legislation. The Patient Protection and Affordable Care Act (P.L. 111- 148, PPACA) was signed into law on March 23, 2010, and later amended by the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). PPACA imposes new requirements on individuals, employers, and health plans; restructures the private health insurance market; sets minimum standards for health coverage; and provides financial assistance to certain individuals and, in some cases, small employers. Among the provisions in PPACA are ones that would have a major impact on private health insurance coverage, including self-insured plans.



Date of Report: June 25, 2010
Number of Pages: 11
Order Number: R41069
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Appropriations and Fund Transfers in the Patient Protection and Affordable Care Act (PPACA)


C. Stephen Redhead
Specialist in Health Policy


On March 23, 2010, President Obama signed into law a comprehensive health care reform bill, the Patient Protection and Affordable Care Act (PPACA; P.L. 111-148). The following week, on March 30, 2010, the President signed the Health Care and Education Reconciliation Act of 2010 (HCERA; P.L. 111-152), which amended various health care and revenue provisions in PPACA.

Among its many provisions, PPACA (as amended by HCERA) restructures the private health insurance market, sets minimum standards for health coverage, creates a mandate for most U.S. residents to obtain health insurance, and provides for the establishment by 2014 of insurance exchanges through which certain individuals and families will be able to receive federal subsidies to reduce the cost of purchasing that coverage. In addition, the new law expands eligibility for Medicaid; reduces the growth in Medicare spending that had been projected under preexisting law; imposes an excise tax on insurance plans found to have high premiums; and makes other changes to the federal tax code, Medicare, Medicaid, and numerous other programs.

In addition, PPACA (as amended) appropriates or transfers from the Medicare Part A and Part B trust funds billions of dollars to support new or existing grant programs and other activities. This report summarizes those appropriations and fund transfers. They include funding for a temporary insurance program for individuals who have been uninsured for several months and have a preexisting condition, as well as funding for states to plan and establish exchanges. PPACA also provides funding for various Medicare and Medicaid demonstration programs, for the creation of a Center for Medicare and Medicaid Innovation to test and implement innovative payment and service delivery models, and for an independent board to provide Congress with proposals for reducing Medicare cost growth and improving quality of care for Medicare beneficiaries.

Among other provisions, the new health reform law appropriates funding for health workforce and maternal and child health programs, and establishes three multi-billion dollar funds. The first will provide a total of $11 billion over five years in supplementary funding for health centers and the National Health Service Corps. The second will fund comparative effectiveness research through FY2019 with a mixture of appropriations and fund transfers. The third, which is funded in perpetuity, will provide funds for prevention, wellness, and other public health-related programs and activities authorized under the Public Health Service Act.



Date of Report: June 23, 2010
Number of Pages: 13
Order Number: R41301
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FDA Final Rule Restricting the Sale and Distribution of Cigarettes and Smokeless Tobacco


C. Stephen Redhead
Specialist in Health Policy

Todd Garvey
Legislative Attorney


On March 19, 2010, the Food and Drug Administration (FDA) reissued a 1996 final rule aimed at reducing underage smoking and use of smokeless tobacco products (e.g., snuff, chewing tobacco). The agency's rulemaking was mandated by the Family Smoking Prevention and Tobacco Control Act, which was enacted last year in response to a 2000 decision by the Supreme Court holding that FDA lacked the statutory authority to regulate tobacco products. The Family Smoking Prevention and Tobacco Control Act (P.L. 111-31) expressly gives FDA broad statutory authority under the Federal Food, Drug, and Cosmetic Act (FFDCA) to regulate the manufacture, distribution, advertising, sale, and use of cigarettes and other tobacco products.

The new FDA tobacco rule builds on the youth access, marketing, and advertising restrictions that the tobacco companies agreed to as part of the 1998 Master Settlement Agreement, which settled lawsuits filed by the states to recover the public health costs of tobacco-related illness. Among its provisions, the rule prohibits the sale of tobacco products to any person under age 18; requires retailers to verify a purchaser's age by photo ID; restricts the sale of tobacco products through vending machines and self-service displays to adult-only facilities; limits tobacco advertising in publications to which children and adolescents are exposed to a black-on-white, text-only format; prohibits the sale of tobacco brand-identified promotional items such as caps and T-shirts; and prohibits brand-name sponsorship of sporting and other cultural events. The rule became effective on June 22, 2010.

The original 1996 rule included a ban on outdoor cigarette and smokeless tobacco advertising (e.g., billboards, posters) within 1,000 feet of schools and playgrounds. The reissued rule does not incorporate such a ban. In Lorillard Tobacco Co. v. Reilly (2001), the U.S. Supreme Court struck down a similar outdoor advertising ban in Massachusetts, arguing that it violated the First Amendment protection of commercial speech. FDA has reserved a section in the reissued rule for future rulemaking on outdoor advertising restrictions. In a separate advanced notice of proposed rulemaking, the agency has requested public comment on this issue and offered several options for more narrowly tailored outdoor advertising restrictions that the agency believes would not violate the First Amendment.

In August 2009, several tobacco companies filed a federal lawsuit against FDA claiming that the Family Smoking Prevention and Tobacco Control Act violates their constitutional right to commercial free speech. On January 5, 2010, a federal district court judge struck down the tobacco rule's provision that limits advertising in publications with significant youth readership to a black-on-white, text-only format. FDA is expected to appeal the court's ruling.



Date of Report: June 24, 2010
Number of Pages: 18
Order Number: R41304
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Friday, June 25, 2010

Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA): Summary and Timeline


Patricia A. Davis, Coordinator
Specialist in Health Care Financing

Jim Hahn
Analyst in Health Care Financing

Geoffrey J. Hoffman
Analyst in Health Care Financing

Paulette C. Morgan
Specialist in Health Care Financing

Julie Stone
Specialist in Health Care Financing

Sibyl Tilson
Specialist in Health Care Financing


Medicare is a federal program that pays for covered health services for most persons 65 years old and older and for most permanently disabled individuals under the age of 65. The rising cost of health care, the impact of the aging baby boomer generation, and declining revenues in a weakened economy continue to challenge the program's ability to provide quality and effective health services to its 45 million beneficiaries in a financially sustainable manner.

On March 23, 2010, the President signed into law H.R. 3590, the Patient Protection and Affordable Care Act (PPACA; P.L. 111-148), as passed by the Senate on December 24, 2009, and the House on March 21, 2010. The new law will, among other things, make numerous statutory changes to the Medicare program. On March 30, 2010, the President signed into law H.R. 4872, the Health Care and Education Reconciliation Act of 2010 (the "Reconciliation Act," or HCERA; P.L. 111-152), which modifies a number of Medicare provisions in PPACA and adds several new provisions.

This report, one of a series of CRS products on PPACA and the Reconciliation Act, examines the Medicare related provisions in these Acts. Estimates from CBO on PPACA and the Reconciliation Act indicate that net reductions in Medicare direct spending will reach approximately $390 billion from FY2010 to FY2019. Major savings are expected from constraining Medicare's annual payment increases for certain providers, tying maximum Medicare Advantage payments near or below spending in fee-for-service Medicare, reducing payments to hospitals that serve a large number of low-income patients, creating an Independent Payment Advisory Board to make changes in Medicare payment rates, and modifying the high-income threshold adjustment for Part B premiums. A new Hospital Insurance tax for high-wage earners will also raise approximately $87 billion over 10 years, and a new Medicare tax on net investment income, added by the Reconciliation Act, is expected to raise an additional $123 billion over 10 years.

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 will bundle 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. In addition, PPACA subjects providers and suppliers to enhanced screening before allowing them to participate in the Medicare program, and both PPACA and the Reconciliation Act increase funding for anti-fraud activities.

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. 
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Date of Report: June 18, 2010
Number of Pages: 140
Order Number: R41196
Price: $29.95

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Medicare Physician Payment Updates and the Sustainable Growth Rate (SGR) System


Jim Hahn
Analyst in Health Care Financing


Each year since 2002, the statutory method for determining the annual updates to the Medicare physician fee schedule, known as the sustainable growth rate (SGR) system, has resulted in a reduction in the reimbursement rates (or a "negative update"). With the exception of 2002, when a 4.8% decrease was applied, Congress has passed a series of bills to override the reductions. The SGR system was established because of the concern that the Medicare fee schedule itself would not adequately constrain overall increases in spending for physicians' services. While the fee schedule limits the amount that Medicare will pay for each service, there are no limits on the volume or mix of services. The SGR system was intended to serve as a restraint on aggregate spending. If expenditures over a period are less than the cumulative spending target for the period, the update is increased. However, if spending exceeds the cumulative spending target over a certain period, future updates are reduced to bring spending back in line with the target.

In the first few years of the SGR system, the actual expenditures did not exceed the targets and the updates to the physician fee schedule were close to the Medicare economic index (MEI, a price index of inputs required to produce physician services) in the first two years (2.3% in 1998 and 1999, compared with a MEI of 2.2% in 1998 and 2.3% in 1999). For the next two years, in 2000 and 2001, the actual physician fee schedule update was more than twice the MEI for those years (5.5% update vs. MEI of 2.4% in 2000, 5.0% update vs. MEI of 2.1% in 2001). However, beginning in 2002, the actual expenditure exceeded allowed targets and the discrepancy has grown with each year, resulting in a series of ever-larger cuts under the formula.

Some criticisms of the SGR system point to purported flaws in the technical details behind the formula, while others have just expressed displeasure with the resultant outcome. Although modifications have been proposed to replace the SGR system, no proposal has garnered sufficient support and almost all proposals would be expensive to implement compared against the current baseline, which necessarily assumes that significant cuts to the fee schedule will occur.

Legislative activity in the current session of Congress includes several bills. S. 1776 would have (1) set the update to the conversion factor at 0% for 2010 and in subsequent years, and (2) sunset the SGR system immediately. On October 21, 2009, the cloture motion to proceed to the bill was not invoked by the Senate by a vote of 47-53. H.R. 3961 would create two categories of physician services (evaluation, management, and preventive services in one category with all other physician services in the other), each with its own separate target growth rate and conversion factor update. CBO has estimated that implementing the bill would increase direct spending by about $210 billion over the 2010-2019 period. On November 19, 2009, the House passed H.R. 3961 by a vote of 243-183, but the Senate has yet to take up the bill. The health care reform bill under consideration in the Senate, an amendment in the form of a substitute to H.R. 3590, does not address this issue. The FY2010 Defense Appropriations Act delayed the implementation of the reductions for two months, until February 28, 2010. The Statutory Pay-As-You-Go Act of 2010 (P.L. 111-139) exempts the amount it would cost to freeze payments for five years from PAYGO rules. H.R. 4691, which became law on March 2, 2010, delayed the payment cuts through March 31, 2010. On April 15, the Senate passed an amended version of H.R. 4851 that extended the payment cut delay through May 31, 2010. The House passed the amended bill and the President signed P.L. 111-157 into law that day. On May 28, 2010, the House passed an amendment to the Senate-amended H.R. 4213, which would increase the update factor by 2.2% from June 1 through December 31, 2010, and provide for an additional 1% increase in 2011. Despite several attempts, the Senate was unsuccessful in passing a further amended version of H.R. 4213, and on June 18, 2010, more than two weeks after the expiration of the extension created by the Continuing Extension Act, the Senate passed an amended version of H.R. 3962 that would extend the payment freeze through November 30, 2010.



Date of Report: June 18, 2010
Number of Pages: 22
Order Number: R40907
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Thursday, June 24, 2010

Tax-Advantaged Accounts for Health Care Expenses: Side-by-Side Comparison


Carol Rapaport
Analyst in Health Care Financing


Four types of tax-advantaged accounts can be used to pay for unreimbursed medical expenses: health care Flexible Spending Accounts (FSAs), Health Reimbursement Accounts (HRAs), Health Savings Accounts (HSAs), and Medical Savings Accounts (MSAs). Unreimbursed medical expenses typically include deductibles, copayments, and goods and/or services not covered by insurance. Although these accounts share some common features, they also differ in important respects.

This report provides brief summaries of the four accounts and compares them with respect to eligibility, contribution limits, use of funds, and other characteristics for tax year 2010. The report then discusses changes to the accounts resulting from the enactment of the Patient Protection and Affordable Care Act (P.L. 111-148 as amended). The final section of the report covers participation levels in these accounts. The report will be updated when relevant statutory or regulatory changes occur, when new data become available, and as Congress considers issues associated with these accounts.



Date of Report: June 18, 2010
Number of Pages: 11
Order Number: RS21573
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The Family and Medical Leave Act: Current Legislative Activity


Linda Levine
Specialist in Labor Economics


Time off to care for one's own health problems or those of family members is not a job-protected entitlement. Thus, employees sometimes have jeopardized their continued employment to be away from the workplace to address health-related matters. With passage of the Family and Medical Leave Act of 1993 (FMLA, P.L. 103-3), Congress mandated in Title I that private employers with at least 50 employees and public employers of any size provide job-protected unpaid leave for 12 workweeks in a 12-month period to employees who meet the length-of service and hours-of-work eligibility requirement in order to care for their own, a child's, spouse's, or parent's serious health condition; to care for a newborn, newly adopted, or newly placed foster child; and upon the birth or placement of an adopted or foster child. Employees in the federal government's executive branch generally are covered under Title II of the FMLA, which is administered by the Office of Personnel Management (OPM).

The Department of Labor, which administers Title I of the act, replaced its 1995 regulation effective January 16, 2009. The final rule contains many changes and addresses regulatory issues raised by enactment of amendments to the FMLA in the National Defense Authorization Act (NDAA) of FY2008. The NDAA provided (1) 12 workweeks of FMLA leave to Title I FMLAeligible employees dealing with issues arising from family members in the Guard or Reserves being called to active duty as a result of a qualifying exigency and (2) 26 workweeks of FMLA leave to Title I and Title II FMLA-eligible employees and next of kin caring for seriously injured or ill service members in the Armed Forces, Guard, or Reserves. Relatedly, in August 2009, OPM proposed regulations about military family caregiver leave for eligible civil service employees and requested comments on whether it should pursue legislation to extend the FY2008 NDAA's exigency leave to employees covered under Title II of the FMLA.

On October 28, 2009, the President signed into law the NDAA for FY2010, which contained further changes to the FMLA. P.L. 111-84 extends qualifying exigency leave to FMLA-eligible family members of regular and reserve members of the Armed Forces deployed to a foreign country and extends military family caregiver leave to eligible family members and next of kin of recent veterans of the Armed Forces, Guard, or Reserves. These provisions apply not only to private sector employers with at least 50 employees and public agencies (Title I of the FMLA), but also to civil service employees (Title II of the FMLA).

The Airline Flight Crew Technical Corrections Act was the only other bill to amend the FMLA that advanced beyond committee referral in the 110th Congress. Because a flight crewmember's work hours are based on in-flight time despite their spending more time at work (e.g., between flights), a full-time flight attendant or pilot usually works less than the 1,250 hours required for FMLA eligibility. The 111th Congress approved the reintroduced bill, which the President signed on December 2009 (P.L. 111-119). The law states that crewmembers who have worked or been paid for not less than 60% of their total monthly guarantee for the prior 12 months and who have worked or been paid for not less than 504 hours in the prior 12 months (excluding personal commute time and vacation, and medical or sick leave) will be considered to have fulfilled the FMLA's hours-of-work requirement.



Date of Report: June 17, 2010
Number of Pages: 18
Order Number: RL31760
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Wednesday, June 23, 2010

Comparison of the Current World Trade Center Medical Monitoring and Treatment Program and the World Trade Center Health Program Proposed by Title I of H.R. 847


Scott Szymendera
Analyst in Disability Policy

Sarah A. Lister
Specialist in Public Health and Epidemiology

In the wake of the September 11, 2001, terrorist attack on New York City, Congress passed appropriations to provide limited health screening and treatment services to persons involved in rescue, recovery, and cleanup operations around the former site of the World Trade Center. This program, now known as the World Trade Center (WTC) Medical Monitoring and Treatment Program (MMTP), is not authorized in statute but rather relies on discretionary appropriations to provide services to eligible individuals. Since its inception in FY2002, the MMTP has received approximately $475 million in federal funds, and over 57,000 responders and community members have met initial eligibility requirements for the program.

Title I of H.R. 847 would eliminate the current MMTP and replace it with a program authorized in statute and financed through mandatory federal spending, partially matched by New York City. This program, proposed to be called the World Trade Center Health Program (WTCHP), would provide full medical screening and treatment benefits to eligible WTC responders and community members. In addition, Title I of H.R. 847 would establish formal eligibility requirements based on a person's activities after September 11, 2001, and his or her current health conditions. Health benefits would be provided by a national network of providers, and the program would be administered by the Department of Health and Human Services (HHS).

The proposed WTCHP would sunset at the end of FY2020, and total federal spending on the program would be capped at $4.6 billion over the life of the program. New York City would contribute 10% of the program's costs, up to a program-life cap of $511 million. In addition to persons already receiving services under the MMTP, the WTCHP would serve up to 25,000 new responders and 25,000 new community members.

Title I of H.R. 847 was ordered reported with an amendment in the nature of a substitute by the House Committee on Energy and Commerce on May 25, 2010, and is now awaiting further action in the House of Representatives.


Date of Report: June 15, 2010
Number of Pages: 14
Order Number: R41294
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Friday, June 18, 2010

Grandfathered Health Plans Under the Patient Protection and Affordable Care Act (PPACA)

Bernadette Fernandez
Analyst in Health Care Financing


The Patient Protection and Affordable Care Act (P.L. 111-148, PPACA, as amended by the Health Care and Education Act, P.L. 111-152)1 includes provisions for the grandfathering of existing health insurance plans. Given that most Americans had private health insurance coverage on the date of enactment of PPACA, most Americans' health coverage will be affected by the grandfathering provisions. 

This report addresses key questions concerning grandfathered plans (e.g., who is covered under such a plan) and insurance reforms affecting such plans, including reporting and consumer information requirements, benefits package, and access to coverage. It also discusses issues regarding the possible discontinuation of grandfathered plans and interaction with the individual mandate.



Date of Report: June 7, 2010
Number of Pages: 5
Order Number: R41166
Price: $19.95

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Summary of Potential Employer Penalties Under the Patient Protection and Affordable Care Act (PPACA)

Hinda Chaikind
Specialist in Health Care Financing

Chris L. Peterson
Acting Section Research Manager


This report describes and illustrates the penalties, when applicable beginning in 2014, to employers under the new health insurance reform law—specifically, in §1513 and §10106 of the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148), as amended by §1003 of the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). Hereafter, PPACA will refer to PPACA as amended by the reconciliation act. 

PPACA does not explicitly mandate an employer to offer employees acceptable health insurance. However, certain employers with at least 50 full-time equivalent employees will face penalties, beginning in 2014, if one or more of their full-time employees obtains a premium credit through an exchange.1 As described in greater detail below, an individual may be eligible for a premium credit either because the employer does not offer coverage or the employer offers coverage that is either not "affordable" or does not provide "minimum value."



Date of Report: June 2, 2010
Number of Pages: 10
Order Number: R41159
Price: $29.95

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Wednesday, June 16, 2010

PPACA Requirements for Offering Health Insurance Inside Versus Outside an Exchange

Chris L. Peterson
Acting Section Research Manager

Bernadette Fernandez
Analyst in Health Care Financing


The Patient Protection and Affordable Care Act (PPACA, P.L. 111-148, as amended) establishes new federal private health insurance standards, many of which are not required to be implemented until 2014. In addition, by 2014, states are to establish "American Health Benefit Exchanges." These exchanges cannot be insurers, but will provide eligible individuals and small businesses with access to insurers' plans in a comparable way, and will have criteria for permitting plans' participation in the exchange. 

By 2014 (or earlier, in some cases), many new federal standards will apply to all insurers offering new coverage in the nongroup (also called individual) and small group markets—regardless of whether that coverage is available inside or outside an exchange. However, insurers who offer coverage through an exchange will be subject to additional requirements. Although these additional requirements, in isolation, could make plans less willing to offer coverage through an exchange, individuals who are eligible for premium tax credits and cost-sharing subsidies can only receive these subsidies through an exchange plan. For example, of the roughly 35 million individuals that CBO projects will be enrolled in nongroup coverage (including grandfathered coverage) in 2019, 24 million are anticipated to have that coverage through an exchange—of whom nearly 20 million will receive premium credits. In addition, exchanges will be required to handle some administrative functions currently handled by insurers, which may reduce insurers' administrative expenses for the nongroup and small group markets. 


This report lists PPACA's private health insurance market reforms that must be in effect by 2014 for new plans in the nongroup and small group markets—with a focus on distinguishing between those that apply inside versus outside an exchange. As such, this report does not go into great detail in describing the specific provisions that apply.1 Moreover, this report only discusses the impact on new plans—not on grandfathered plans, which cannot be offered through an exchange.2 The legislative references are to sections of PPACA as amended by Title X of P.L. 111-148 and by P.L. 111-152, generally without the additional references to Title X or P.L. 111-152.



Date of Report: June 10, 2010
Number of Pages: 10
Order Number: R41269
Price: $29.95

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Medicare Physician Payment Updates and the Sustainable Growth Rate (SGR) System

Jim Hahn
Analyst in Health Care Financing

Each year since 2002, the statutory method for determining the annual updates to the Medicare physician fee schedule, known as the sustainable growth rate (SGR) system, has resulted in a reduction in the reimbursement rates (or a "negative update"). With the exception of 2002, when a 4.8% decrease was applied, Congress has passed a series of bills to override the reductions. The SGR system was established because of the concern that the Medicare fee schedule itself would not adequately constrain overall increases in spending for physicians' services. While the fee schedule limits the amount that Medicare will pay for each service, there are no limits on the volume or mix of services. The SGR system was intended to serve as a restraint on aggregate spending. If expenditures over a period are less than the cumulative spending target for the period, the update is increased. However, if spending exceeds the cumulative spending target over a certain period, future updates are reduced to bring spending back in line with the target. 

In the first few years of the SGR system, the actual expenditures did not exceed the targets and the updates to the physician fee schedule were close to the Medicare economic index (MEI, a price index of inputs required to produce physician services) in the first two years (2.3% in 1998 and 1999, compared with a MEI of 2.2% in 1998 and 2.3% in 1999). For the next two years, in 2000 and 2001, the actual physician fee schedule update was more than twice the MEI for those years (5.5% update vs. MEI of 2.4% in 2000, 5.0% update vs. MEI of 2.1% in 2001). However, beginning in 2002, the actual expenditure exceeded allowed targets and the discrepancy has grown with each year, resulting in a series of ever-larger cuts under the formula. 

Some criticisms of the SGR system point to purported flaws in the technical details behind the formula, while others have just expressed displeasure with the resultant outcome. Although modifications have been proposed to replace the SGR system, no proposal has garnered sufficient support and almost all proposals would be expensive to implement compared against the current baseline, which necessarily assumes that significant cuts to the fee schedule will occur. 

Legislative activity in the current session of Congress includes several bills. S. 1776 would have (1) set the update to the conversion factor at 0% for 2010 and in subsequent years, and (2) sunset the SGR system immediately. On October 21, 2009, the cloture motion to proceed to the bill was not invoked by the Senate by a vote of 47-53. H.R. 3961 would create two categories of physician services (evaluation, management, and preventive services in one category with all other physician services in the other), each with its own separate target growth rate and conversion factor update. CBO has estimated that implementing the bill would increase direct spending by about $210 billion over the 2010-2019 period. On November 19, 2009, the House passed H.R. 3961 by a vote of 243-183, but the Senate has yet to take up the bill. The health care reform bill under consideration in the Senate, an amendment in the form of a substitute to H.R. 3590, does not address this issue. The FY2010 Defense Appropriations Act delayed the implementation of the reductions for two months, until February 28, 2010. The Statutory Pay-As-You-Go Act of 2010 (P.L. 111-139) exempts the amount it would cost to freeze payments for five years from PAYGO rules. H.R. 4691, which became law on March 2, 2010, delayed the payment cuts through March 31, 2010. On April 15, the Senate passed an amended version of H.R. 4851 that extended the payment cut delay through May 31, 2010. The House passed the amended bill and the President signed P.L. 111-157 into law that day. On May 28, 2010, the House passed an amendment to the Senate-amended H.R. 4213, which would increase the update factor by 2.2% from June 1 through December 31, 2010, and provide for an additional 1% increase in 2011.


Date of Report: June 3, 2010
Number of Pages: 21
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The ADA Amendments Act: Judicial Decisions Relating to Testing Accommodation

Nancy Lee Jones
Legislative Attorney

The Americans with Disabilities Act (ADA) is a broad civil rights act prohibiting discrimination against individuals with disabilities and has as its purpose "to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities." The ADA was amended in 2008 by the ADA Amendments Act (ADAAA), P.L. 110-325, to expand the definition of disability from the manner in which it had been interpreted by the Supreme Court, an expansion which could effect whether accommodations are provided for certain tests such as bar examinations. This report will examine the statutory change in the definition particularly as it relates to the concept of "substantially limits," as well as judicial decisions and commentary relating to testing accommodation.


Date of Report: June 3, 2010
Number of Pages: 8
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Public Health, Workforce, Quality, and Related Provisions in the Patient Protection and Affordable Care Act (PPACA)

Erin D. Williams, Coordinator
Specialist in Public Health and Bioethics

C. Stephen Redhead, Coordinator
Specialist in Health Policy


In March 2010, President Obama signed into law a comprehensive health reform bill, the Patient Protection and Affordable Care Act (PPACA; P.L. 111-148), and a package of amendments to PPACA, the Health Care and Education Reconciliation Act of 2010 (HCERA; P.L. 111-152). Health reform had been the Obama Administration's top domestic priority, driven by concerns about the growing ranks of the uninsured and the unsustainable growth in spending on health care and health insurance. Improving access to care and controlling rising costs were seen to require changes to both the financing and delivery of health care. This report, one of a series of CRS products on PPACA, as amended by HCERA, focuses on the new law's workforce, public health, health care quality, and related provisions. It includes summaries of these provisions and explores some of their implications for health policy. 

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. 

HCERA amends several of the PPACA provisions discussed in this report. Those provisions address funding for community health centers and the National Health Service Corps, 340B drug pricing, and taxes on prescription drugs and medical devices.



Date of Report: June 7, 2010
Number of Pages: 119
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Health Insurance Premium Assistance for the Unemployed: The American Recovery and Reinvestment Act of 2009

Janemarie Mulvey, Coordinator
Specialist in Aging and Income Security

Hinda Chaikind
Specialist in Health Care Financing

Bernadette Fernandez
Analyst in Health Care Financing


As the nation enters its third year of the current economic recession, the unemployment rate is currently near 10%. One consequence of unemployment is that people can lose their employersponsored health insurance coverage. The 111th Congress has passed legislation that begins to address this problem. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) includes provisions to subsidize health insurance coverage through the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and expand tax credits to unemployed workers through the Health Coverage Tax Credit (HCTC). ARRA includes COBRA premium subsidies of 65% to help the unemployed afford health insurance coverage from their former employer. Initially, the subsidy was available for up to 9 months to those individuals who meet the income test and who are involuntarily terminated on or after September 1, 2008, and before January 1, 2010. On December 19, 2009, the Department of Defense Appropriations Act 2010 (P.L. 111-118) extended the eligibility period for the COBRA subsidy by an additional two months (through February 28, 2010) and the maximum period for receiving the subsidy was also extended an additional six months (from 9 to 15 months). On March 2, the Temporary Extension Act of 2010 (P.L. 111-144) was enacted into law and extended eligibility for COBRA premiums subsidies to individuals who are involuntarily terminated through March 31, 2010. On April 15, the Continuing Extension Act of 2010 (P.L. 111-157) was enacted into law, extending eligibility for the COBRA premium subsidy to individuals who are involuntarily terminated through May 31, 2010. 

Under current law, individuals who are involuntarily terminated on or after May 31, 2010, would not be eligible for the COBRA premium subsidy. Earlier versions of H.R. 4213, the American Jobs and Closing Tax Loopholes Act of 2010, passed by both the House and Senate included a provision to extend eligibility for the COBRA premium subsidy to individuals who lose their jobs on or before December 31, 2010. However, the most recent House-passed version of H.R. 4213 on May 28, 2010, removed this provision. This bill is now going back to the Senate for consideration. 

In addition, a number of provisions in ARRA make modifications to the HCTC and the Trade Adjustment Assistance (TAA) programs. These include increasing the HCTC from 65% to 80% of the cost of qualified health insurance, and expanding the eligibility criteria for TAA assistance (which, in turn, expands HCTC eligibility) to include service sector and public agency workers. 

Whether the unemployed will benefit from the premium assistance programs in ARRA depends on their individual circumstances. Those that are involuntarily terminated and lose their employer-sponsored health insurance may be eligible for the subsidy. Other individuals, although considered to be unemployed, will not meet the criteria of involuntary termination. This group includes unemployed individuals (1) who were terminated but did not have employer-sponsored coverage to begin with, (2) who voluntarily left their jobs, and (3) who are just entering or reentering the workforce. For those unemployed without health insurance coverage, they either rely on spouses and family members, purchase insurance in the individual market, or remain uninsured. It is estimated that 55% of those who were involuntarily terminated most likely had employer-sponsored coverage prior to being laid off and may benefit from the COBRA subsidies. In addition to those who are unemployed, there are other at-risk groups who are not eligible for the premium assistance provisions in ARRA but may have lost health insurance coverage due to changes in their work status. These groups include involuntary part-time workers and discouraged workers who are no longer seeking employment. 
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Date of Report: June 3, 2010
Number of Pages: 16
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Unemployment and Health Insurance: Current Legislation and Issues

Janemarie Mulvey
Specialist in Aging and Income Security


When workers lose their job, they can also lose their health insurance. For people with good health and luck, loss of insurance might not matter very much because they would not use many health care services anyway. However, for people who have health problems or are injured, loss of coverage can be serious. Without insurance, people often have difficulty obtaining needed care and problems paying for the care they receive. Unemployed people who cannot postpone care may incur large bills that add to their financial distress. 

The 111th Congress had passed legislation that temporarily addressed this problem. For example, the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5), as amended by P.L. 111-118, included two provisions that help some unemployed maintain or get coverage: a 65% COBRA premium subsidy (for 15 months of coverage) and an increase in the Health Coverage Tax Credit (HCTC). Most recently, the Continuing Extension Act of 2010 (P.L. 111-157) was enacted on April 15, 2010, and extended eligibility for the COBRA premium subsidy through May 31, 2010. 

Under current law, individuals who are involuntarily terminated on or after May 31, 2010, would not be eligible for the COBRA premium subsidy. Earlier versions of H.R. 4213, the American Jobs and Closing Tax Loopholes Act of 2010, passed by both the House and Senate included a provision to extend eligibility for the COBRA premium subsidy to individuals who lose their jobs on or before December 31, 2010. However, the most recent House version of H.R. 4213 passed on May 28, 2010, removed this provision. This bill is now going back to the Senate for consideration and possible amendments. 

In the longer-term, enactment of the Patient Protection and Affordable Care Act (PPACA; P.L. 111-148) will enable unemployed individuals who meet certain income criteria to obtain subsidized health insurance coverage. These include expansion of Medicaid to families with incomes under 133% of the federal poverty level and premium credits and subsidies for families with income below 400% of the federal poverty level. However, beyond immediate reforms to the health insurance market, many of the provisions in PPACA will not be implemented until 2014. 

This report is divided into five parts: (1) Analysis showing the diversity of the unemployed population, (2) Analysis showing the relationship between unemployment and loss of employer sponsored health insurance, (3) Summaries of current federal programs and provisions that can help some unemployed obtain or retain health insurance, (4) Summaries of legislation introduced in the 111th Congress, and (5) Additional options that might be considered.



Date of Report: June 3, 2010
Number of Pages: 20
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Federal Employees Health Benefits Program: Available Health Insurance Options

Hinda Chaikind
Specialist in Health Care Financing

Mark Newsom
Analyst in Health Care Financing

The Federal Employees Health Benefits Program (FEHBP) provides health insurance coverage to about 8 million people. FEHBP provides many health insurance plan options for enrollees, including several nationally available fee-for-service plans, locally available Health Maintenance Organizations (HMOs), and, since 2003, various high-deductible health insurance plan options combined with a tax-advantaged account. Beneficiaries can use their tax-advantaged accounts to cover qualified medical expenses. Also, since July 2003, FEHBP-eligible active employees can place their own pre-tax wages into a Health Care Flexible Spending Account (HCFSA) to cover qualified medical expenses. Since 2007, eligible individuals may also elect supplemental dental and vision plans. While enrollees have a range of choices, they must decide which options best match their needs, the amount of their wages they choose to contribute to health insurance, and how risk-averse they are to potential out-of-pocket costs. 

The program is administered by the Office of Personnel Management (OPM), which is statutorily given the authority to contract with qualified carriers offering plans and to prescribe regulations necessary to carry out the statute, among other duties. 

The Patient Protection and Affordable Care Act (P.L. 111-148, PPACA, as amended by the Health Care and Education Act, P.L. 111-152) includes a number of provisions that require certain changes to be made to FEHBP plans or by employing agencies.


Date of Report: June 3, 2010
Number of Pages: 26
Order Number: RS21974
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Religious Exemptions for Mandatory Health Care Programs: A Legal Analysis

Cynthia Brougher
Legislative Attorney

In March 2010, Congress enacted the Patient Protection and Affordable Care Act (PPACA), which included a provision that requires certain individuals to have a minimum level of health insurance. Additionally, the threat of bioterrorism has caused some to consider the possibility of introducing vaccination programs to prevent an outbreak of serious illnesses. Programs like health care coverage and vaccinations have the potential to violate certain religious beliefs and therefore may conflict with the First Amendment. In the continuing debate over issues for which mandatory health care programs might be solutions, questions have been raised about the constitutional issues relating to exemptions for health care programs. 

For the purposes of this report, mandatory health care programs are those which require individuals to take some action relating to a health care policy objective. A variety of mandatory health care programs currently exists at the federal and state levels. Some programs are medical programs that require individuals to participate in a medical program, while some programs are financial programs that require individuals to pay for program costs. For example, all 50 states and the District of Columbia require children to be vaccinated for certain illnesses and diseases before entering school. At the federal level, the tax system requires individuals to pay taxes that fund Medicare to provide health care to elderly citizens. In some instances, mandatory health care programs include exemptions that allow qualified persons to opt out of the required action. Specifically, religious exemptions have been provided in a variety of mandatory health care programs, including state immunization laws and Medicare taxes. These religious exemptions permit individuals who object to the program based on religious beliefs to avoid compromising those beliefs. 

This report will discuss the legal issues that arise in the context of religious exemptions for mandatory health care programs. It will discuss constitutional and statutory provisions relating to religious protection and how such laws have been applied in the medical context. The report will also briefly address examples of health care programs that have included religious exemptions, including a discussion of the religious conscience exemption included in PPACA. It will analyze whether the U.S. Constitution requires religious exemptions for mandatory health care programs and whether, if not required, the Constitution allows religious exemptions for such programs.


Date of Report: May 26, 2010
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Community Living Assistance Services and Supports (CLASS) Provisions in the Patient Protection and Affordable Care Act (PPACA)

Janemarie Mulvey
Specialist in Aging and Income Security

Kirsten J. Colello
Specialist in Health and Aging Policy


Under current law, the majority of paid long-term care (LTC) services are funded by public programs, such as Medicaid and Medicare. However, these programs are limited in scope and continue to face increased financial pressures. Although private LTC insurance is available to provide some financial protection against an individual's risk of the potentially high cost of LTC, fewer than 10% of individuals aged 50 and older own such a policy. Thus, for the majority of older Americans, the out-of-pocket cost of obtaining paid help for these services may far exceed their financial resources. To address gaps in LTC coverage and assist individuals and families in paying for such services, the recently enacted Patient Protection and Affordable Care Act (PPACA; P.L. 111-148) establishes a federally administered voluntary LTC insurance program entitled the Community Living Assistance Services and Supports (CLASS) program. PPACA creates a new Title XXXII of the Public Health Service Act (PHSA) titled Community Living Assistance Services and Supports. 

Once established, employed individuals aged 18 and older can voluntarily enroll in the CLASS program. CLASS enrollment would not be subject to medical underwriting, so coverage would be available to all persons who enroll, regardless of pre-existing conditions. Employers can choose to participate in the CLASS program. In doing so, they must automatically enroll eligible employees. Employees would then have the opportunity to "opt-out" if they do not want to participate. The Secretary of Health and Human Services (HHS) is required to develop an alternative enrollment process for self-employed individuals, those with more than one employer, and those who have an employer that does not elect to participate. 

Premiums for the CLASS program are to be determined by the Secretary based on 75-year actuarial estimates of expected future use and expenditures. Premiums would vary by age at enrollment. PPACA also includes premium subsidies for workers with incomes below the federal poverty level and full-time students aged 18 to 21 who currently are working. To be eligible to recieve benefits an individual must be an active enrollee who meets the five-year vesting and minimum earnings requirements. In addition, an eligible individual must have a functional limitation, as certified by a licensed health care practitioner, that is expected to last for 90 days. Benefits to eligible recipients include a cash benefit of at least an average of $50 a day (based on the reasonably expected distribution of beneficiaries receiving benefits at various levels). Other benefits include advocacy services, and advice and assistance counseling on accessing and coordinating LTC services. 

This report first discusses the cost and financing for LTC services as well as the current market for private LTC insurance. It then details those CLASS program requirements for enrollment, premiums, eligibility, benefits, administration and oversight as specified in PPACA. This report then discusses the federal budget implications of the CLASS program, as estimated by the Congressional Budget Office (CBO) and the Centers for Medicare and Medicaid Services (CMS). Finally, the report provides a timeline of CLASS program provisions enacted under PPACA.



Date of Report: June 4, 2010
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Medicaid: The Federal Medical Assistance Percentage (FMAP)

April Grady
Specialist in Health Care Financing

Chris L. Peterson
Acting Section Research Manager

Medicaid is a health insurance program jointly funded by the federal government and the states. Generally, eligibility for Medicaid is limited to low-income children, pregnant women, parents of dependent children, the elderly, and people with disabilities. The federal government's share of a state's expenditures for most Medicaid services is called the federal medical assistance percentage (FMAP). The remainder is referred to as the nonfederal share, or state share. 


Generally determined annually, the FMAP is designed so that the federal government pays a larger portion of Medicaid costs in states with lower per capita income relative to the national average (and vice versa for states with higher per capita incomes). For FY2010, the regular FMAPs—that is, excluding the impact of the temporary FMAP increase included in the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5)—range from 50.00% to 75.67%. 


In the State Children's Health Insurance Program (CHIP), expenditures are generally reimbursed at the enhanced FMAP (E-FMAP). This is calculated by reducing the state share under the regular FMAP by 30%. 


In the 111th Congress, ARRA included a temporary FMAP increase for nine quarters, subject to certain requirements. The Administration estimated that the provision will increase federal payments to states by more than $90 billion. For the first quarter of FY2010, the FMAPs reflecting the ARRA increase ranged from 61.12% (Alaska) to 84.86% (Mississippi). (The ARRA FMAP increase does not affect the CHIP E-FMAP.) The ARRA FMAPs end December 31, 2010. 


On March 10, 2010, the Senate passed H.R. 4213, which included a provision to extend the ARRA FMAPs by two quarters, through June 30, 2011. Although the House Rules Committee had reported an amendment (H.Rept. 111-497 accompanying H.Res. 1403) containing a similar provision on May 26, the House passed a version of H.R. 4213 that excluded the ARRA FMAP extension on May 28. 


The new health reform law enacted March 23, 2010 (P.L. 111-148, H.R. 3590, the Patient Protection and Affordable Care Act, or PPACA, as amended by P.L. 111-152), did not extend the ARRA FMAPs. PPACA requires that for states to get any Medicaid matching funds, they cannot make Medicaid or CHIP "eligibility standards, methodologies, or procedures" more restrictive than those in effect on March 23, 2010, PPACA's enactment date. In 2014, the law requires states with Medicaid programs to expand coverage to some currently ineligible low-income parents and childless adults. For these newly eligible individuals, states will have a 100% FMAP for three years and then slightly reduced rates well above regular FMAPs.


Date of Report: June 1, 2010
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PPACA Requirements for Offering Health Insurance Inside Versus Outside an Exchange

Chris L. Peterson
Acting Section Research Manager

Bernadette Fernandez
Analyst in Health Care Financing


The Patient Protection and Affordable Care Act (PPACA, P.L. 111-148, as amended) establishes new federal private health insurance standards, many of which are not required to be implemented until 2014. In addition, by 2014, states are to establish "American Health Benefit Exchanges." These exchanges cannot be insurers, but will provide eligible individuals and small businesses with access to insurers' plans in a comparable way, and will have criteria for permitting plans' participation in the exchange. 

By 2014 (or earlier, in some cases), many new federal standards will apply to all insurers offering new coverage in the nongroup (also called individual) and small group markets—regardless of whether that coverage is available inside or outside an exchange. However, insurers who offer coverage through an exchange will be subject to additional requirements. Although these additional requirements, in isolation, could make plans less willing to offer coverage through an exchange, individuals who are eligible for premium tax credits and cost-sharing subsidies can only receive these subsidies through an exchange plan. For example, of the roughly 35 million individuals that CBO projects will be enrolled in nongroup coverage (including grandfathered coverage) in 2019, 24 million are anticipated to have that coverage through an exchange—of whom nearly 20 million will receive premium credits. In addition, exchanges will be required to handle some administrative functions currently handled by insurers, which may reduce insurers' administrative expenses for the nongroup and small group markets. 

This report lists PPACA's private health insurance market reforms that must be in effect by 2014 for new plans in the nongroup and small group markets—with a focus on distinguishing between those that apply inside versus outside an exchange. As such, this report does not go into great detail in describing the specific provisions that apply.1 Moreover, this report only discusses the impact on new plans—not on grandfathered plans, which cannot be offered through an exchange.2 The legislative references are to sections of PPACA as amended by Title X of P.L. 111-148 and by P.L. 111-152, generally without the additional references to Title X or P.L. 111-152.



Date of Report: June 10, 2010
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Health Insurance: State High Risk Pools

Bernadette Fernandez
Analyst in Health Care Financing

In an effort to expand the options for health coverage, 35 states have established high risk health insurance pools. These programs target individuals who cannot obtain or afford health insurance in the private market, primarily because of preexisting health conditions. Also, many states use their high risk pools to comply with the portability and guaranteed availability provisions of the Health Insurance Portability and Accountability Act of 1996 (P.L. 104-191). 

In general, state high risk pools tend to be small and enroll a small percentage of the uninsured. In 2008, a total of 199,418 individuals were enrolled in the 34 high risk pools in operation that year. State-established nonprofit organizations typically run these pools, with private insurance companies handling day-to-day operations. Although benefit packages vary across states and plans, they generally reflect health benefits that are available in the private insurance market. The majority of high risk pools cap premiums between 150% to 200% of market rates, and pools are subsidized through insurer assessments and other funding mechanisms. 

The Trade Act of 2002 (P.L. 107-210) appropriated a total of $100 million for FY2003-FY2004. With the expiration of authorizing legislation for federal funding of state pools, the 109th Congress took up this issue. The House passed H.R. 4519, the State High Risk Pool Funding Extension Act of 2006, which reauthorized federal grants to state high risk pools through FY2010, and changed the funding formula used for such grants. The Act authorized $15 million for seed grants and $75 million for operational and bonus grants for FY2006. The Senate passed H.R. 4519 without amendment, and it was signed into law (P.L. 109-172) on February 10, 2006. 

As part of the budget reconciliation process, the Senate passed S. 1932, the Deficit Reduction Act of 2005 (DRA) conference agreement, which provided appropriations for the grants authorized under H.R. 4519. The measure also included conforming language on enactment of H.R. 4519. The House agreed to the Senate-amended DRA bill, and it was signed it into law (P.L. 109-171) on February 8, 2006. The Centers for Medicare and Medicaid Services (CMS) awarded grants to 31 states that experienced operational losses in 2005. Of those 31 states, 25 also received bonus grants. In 2006, CMS awarded seed grants to five states, and to another five states in 2007. 

The 110th Congress took up the issue of extending the federal grant program by making funding available pursuant to the Consolidated Appropriations Act of 2008 (P.L. 110-161). The grant funding totaled $49,127,000. In July 2008, CMS announced that 30 states received operational and bonus grants totaling $49,126,500. 

The 111th Congress provided $75,000,000 in appropriations for grants to state high risk pools under the Omnibus Appropriations Act of 2009 (P.L. 111-8). In May of 2009, CMS announced the availability of these grants. To date, the grant awards have not been posted by CMS. 

The Patient Protection and Affordable Care Act (P.L. 111-148, PPACA) was signed into law on March 23, 2010. On March 30, 2010, PPACA was amended by the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). PPACA requires the Secretary of Health and Human Services to establish a temporary high risk pool program, no later than 90 days after enactment, to provide health insurance coverage to eligible individuals. To date, the Secretary has issued letters to governors and insurance commissioners to survey state interest in participating in this new high risk pool program.


Date of Report: May 19, 2010
Number of Pages: 15
Order Number: RL31745
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Monday, June 7, 2010

Factors Affecting the Demand for Long-Term Care Insurance: Issues for Congress


Janemarie Mulvey
Specialist in Aging and Income Security

As the 78 million baby boomers approach retirement, many are concerned they will not have sufficient savings to sustain their standard of living in retirement. Few, however, may be focused on another risk to their retirement security—the potential cost of financing often expensive longterm care (LTC) services. LTC services include help with a either a functional or cognitive impairment and generally include assistance with activities such as bathing, eating, and dressing. For the majority of older Americans, the cost of obtaining paid help for these services may far exceed their financial resources in the future.

Private long-term care insurance (LTCI) is available to provide some financial protection for persons against the risk of the potentially high cost of LTC. Yet, only 7% of LTC spending was paid by LTCI in 2007. This low rate of financing reflects relatively low demand for LTCI over the past few decades. Moreover, most policy owners have not yet reached the age where they may need services.

A number of factors have adversely affected the demand for LTCI. The cost and complexity of LTCI policies have been cited as major deterrents to purchasing LTCI. In addition, increased concerns have arisen about the adequacy of consumer protections for LTCI as a result of inconsistencies in LTCI laws and regulations across the states. More recently, adverse publicity about potential problems with claims denials and heightened concerns about the future solvency of LTCI insurers in the current economic environment have further dampened demand.

The private LTCI market has undergone significant changes in the past three decades. For example, the employer-sponsored market has grown as a share of total LTCI sales and the overall market has become more concentrated in terms of the number of companies selling the product. Further, policies have become more comprehensive in terms of services covered and inflation protection, but this has also increased LTCI premiums. Finally, a number of newer product lines have been introduced that combine LTCI with other retirement and life-insurance products.

The 111th Congress has introduced a number of legislative proposals aimed at increasing participation in the voluntary LTCI market. These include proposals to

• increase tax incentives to lower the after-tax cost of policies;

• improve consumer protections to boost consumer confidence in the product;

• provide a publicly administered long-term care insurance product; and

• expand consumer education.

In addition, the recently enacted Patient Protection and Affordable Care Act (PPACA; P.L. 111- 148) establishes a publicly administered voluntary LTCI program entitled the Community Living Assistance Services and Supports (CLASS) program. PPACA creates a new Title XXXII of the Public Health Service Act (PHSA) titled Community Living Assistance Services and Supports.

This report discusses the role of LTCI in financing LTC costs and current trends in the LTCI industry; factors affecting the demand for LTCI, including cost and complexity of the product and adequacy of consumer protections; and key features of legislative proposals in the 111th Congress to address these issues. 
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Date of Report: May 14, 2010
Number of Pages: 25
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Self-Insured Health Insurance Coverage


Bernadette Fernandez
Analyst in Health Care Financing

Private health insurance can be provided to groups of people that are drawn together by an employer or other organization. Such groups are generally formed for some purpose other than obtaining insurance, like employment. When insurance is provided to a group, it is referred to as "group coverage" or "group insurance." A common distinction made between private health coverage offered to groups is how such coverage is funded. That is, the plan sponsor may either purchase group health insurance from a state-licensed insurance carrier, or fund the health benefits directly. The former refers to fully insured plans; the latter, self-insured plans.

Self-insurance refers to coverage that is provided by the organization seeking coverage for its members. Such organizations set aside funds and pay for health benefits directly. (Enrollees may still be charged a premium.) Under self-insurance, the organization itself bears the risk for covering medical expenses. Because self-insured plans are not purchased from an insurance carrier licensed by the state, they are exempt from state requirements and subject only to federal regulation. With fully insured plans, the insurance carrier charges the plan sponsor a fee for providing coverage for the benefits specified in the insurance contract. The fee typically is in the form of a monthly premium. (In turn, the sponsor may decide that each person or family who wishes to enroll must pay part of the premium cost.) Under the fully insured scenario, the private insurer bears the insurance risk; that is, the insurer is responsible for covering the applicable costs associated with covered benefits. Insurance purchased from a state-licensed insurer is subject to both federal and state regulation.

A majority of individuals with private health insurance coverage are enrolled in self-insured plans. In 2008, 55% of private-sector enrollees were in such plans. This proportion differs when comparing small firms and large firms. In 2008, of the private-sector workers who were employed at small firms with health coverage, 12% were enrolled in self-insured health plans. In contrast, of private-sector workers employed at large firms, 65% were enrolled in self-insured plans. Consistent with these findings is the share of private-sector firms that offer at least one self-insured plan. In 2008, while 34% of all private-sector firms that offered insurance had at least one self-insured plan, only 13% of small firms had such a plan, compared with 63% of large firms.

To assist individuals, families, and employers in obtaining health coverage, the 111th Congress passed major health reform legislation. The Patient Protection and Affordable Care Act (P.L. 111- 148, PPACA) was signed into law on March 23, 2010, and later amended by the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). PPACA imposes new requirements on individuals, employers, and health plans; restructures the private health insurance market; sets minimum standards for health coverage; and provides financial assistance to certain individuals and, in some cases, small employers. Among the provisions in PPACA are ones that would have a major impact on private health insurance coverage, including self-insured plans.


Date of Report: May 12, 2010
Number of Pages: 11
Order Number: R41069
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The Market Structure of the Health Insurance Industry


D. Andrew Austin
Analyst in Economic Policy

Thomas L. Hungerford
Specialist in Public Finance

In March 2010, Congress passed a pair of measures designed to reform the U.S. health care system and address the twin challenges of constraining rapid growth of health care costs and expanding access to high-quality health care. On March 21, the House passed the Patient Protection and Affordable Care Act (H.R. 3590), which the Senate had approved on Christmas Eve, as well as the Health Care and Education Reconciliation Act of 2010 (H.R. 4872). President Obama signed the first measure (P.L. 111-148) on March 23 and the second on March 30 (P.L. 111-152). On November 2, 2009, the House Judiciary Committee reported out the Health Insurance Industry Antitrust Enforcement Act (H.R. 3596), which would limit antitrust exemptions provided by the McCarran-Ferguson Act (P.L. 79-15). The House passed the Health Insurance Industry Fair Competition Act (H.R. 4626) on February 24, 2010.

This report discusses how the current health insurance market structure affects the two policy goals of expanding health insurance coverage and containing health care costs. Concerns about concentration in health insurance markets are linked to wider concerns about the cost, quality, and availability of health care. The market structure of the health insurance and hospital industries may have contributed to rising health care costs and deteriorating access to affordable health insurance and health care. Many features of the health insurance market and the ways it links to other parts of the health care system can hinder competition, lead to concentrated markets, and produce inefficient outcomes. Health insurers are intermediaries in the transaction of the provision of health care between patients and providers: reimbursing providers on behalf of patients, exercising some control over the number and types of services covered, and negotiating contracts with providers on the payments for health services. Consequently, policies affecting health insurers will likely affect the other parts of the health care sector.

The market structure of the U.S. health insurance industry not only reflects the nature of health care, but also its origins in the 1930s and its evolution in succeeding decades. Before World War II, many commercial insurers doubted that hospital or medical costs were an insurable risk. But after the rapid spread of Blue Cross plans in the mid-1930s, several commercial insurers began to offer health coverage. By the 1950s, commercial health insurers had become potent competitors and began to cut into Blue Cross's market share in many regions, changing the competitive environment of the health insurance market.

Evidence suggests that health insurance markets are highly concentrated in many local areas. Many large firms that offer health insurance benefits to their employees have self-insured, which may put some competitive pressure on insurers, although this is unlikely to improve market conditions for other consumers. The exercise of market power by firms in concentrated markets generally leads to higher prices and reduced output—high premiums and limited access to health insurance—combined with high profits. Many other characteristics of the health insurance markets, however, also contribute to rising costs and limited access to affordable health insurance. Rising health care costs, in particular, play a key role in rising health insurance costs.

Complex interactions among health insurance, health care providers, employers, pharmaceutical manufacturers, tax policy, and the medical technology industry have helped increase health costs over time. Reducing the growth trajectory of health care costs may require policies that affect these interactions. Policies focused only on health insurance sector reform may yield some results, but are unlikely to solve larger cost growth and limited access problems.


Date of Report: May 25, 2010
Number of Pages: 68
Order Number: R40834
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Friday, June 4, 2010

TRICARE and VA Health Care: Impact of the Patient Protection and Affordable Care Act (PPACA)


Sidath Viranga Panangala
Specialist in Veterans Policy

Don J. Jansen
Analyst in Defense Health Care Policy

The 111th Congress recently passed, and the President signed into law, the Patient Protection and Affordable Care Act (P.L. 111-148; PPACA), as amended by the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152; HCERA). In general, PPACA did not make any significant changes to the Department of Defense (DOD) TRICARE program or to the Department of Veterans Affairs (VA) health care system. However, many have sought clarification as to whether certain provisions in PPACA, such as a mandate for most individuals to have health insurance, or extending dependant coverage up to age 26, would apply to TRICARE and VA health care beneficiaries.

To address some of these concerns, Congress has introduced and/or enacted legislation. The TRICARE Affirmation Act (H.R. 4887; P.L. 111-159), signed into law on April 26, 2010, affirms that TRICARE satisfies the minimum acceptable coverage requirement in PPACA. Similarly H.R. 5014 (presented to the President) would clarify that the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA), Spina Bifida Health Care Program, and the Children of Women Vietnam Veterans Health Care Program meet the "minimum essential coverage" requirement under PPACA. The House Armed Services Committee reported a bill on May 21, 2010, the National Defense Authorization Act for FY2011 bill (H.R. 5136), that includes a section 702 that would extend dependent coverage under TRICARE until age 26. The provision includes a requirement for the Secretary of Defense to prescribe an actuarially appropriate premium for the extended coverage. Likewise, three proposed measures have been introduced to extend CHAMPVA coverage to eligible dependent children up to age 26: H.R. 5185, H.R. 5206, and S. 3356.

This report addresses key questions concerning how PPACA will likely affect TRICARE and VA health care.


Date of Report: May 27, 2010
Number of Pages: 11
Order Number: R41198
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Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA)


Patricia A. Davis, Coordinator
Specialist in Health Care Financing

Jim Hahn
Analyst in Health Care Financing

Paulette C. Morgan
Specialist in Health Care Financing

Julie Stone
Specialist in Health Care Financing

Sibyl Tilson
Specialist in Health Care Financing

Medicare is a federal program that pays for covered health services for most persons 65 years old and older and for most permanently disabled individuals under the age of 65. The rising cost of health care, the impact of the aging baby boomer generation, and declining revenues in a weakened economy continue to challenge the program's ability to provide quality and effective health services to its 45 million beneficiaries in a financially sustainable manner.

On March 23, 2010, the President signed into law H.R. 3590, the Patient Protection and Affordable Care Act (PPACA; P.L. 111-148), as passed by the Senate on December 24, 2009, and the House on March 21, 2010. The new law will, among other things, make numerous statutory changes to the Medicare program. On March 30, 2010, the President signed into law H.R. 4872, the Health Care and Education Reconciliation Act of 2010 (the "Reconciliation Act," or HCERA; P.L. 111-152), which modifies a number of Medicare provisions in PPACA and adds several new provisions.

This report, one of a series of CRS products on PPACA and the Reconciliation Act, examines the Medicare related provisions in these Acts. Estimates from CBO on PPACA and the Reconciliation Act indicate that net reductions in Medicare direct spending will reach approximately $390 billion from FY2010 to FY2019. Major savings are expected from constraining Medicare's annual payment increases for certain providers, tying maximum Medicare Advantage payments near or below spending in fee-for-service Medicare, reducing payments to hospitals that serve a large number of low-income patients, creating an independent Payment Advisory Board to make changes in Medicare payment rates, and modifying the high-income threshold adjustment for Part B premiums. A new Hospital Insurance tax for high-wage earners will also raise approximately $87 billion over 10 years, and a new Medicare tax on net investment income, added by the Reconciliation Act, is expected to raise an additional $123 billion over 10 years.

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 will bundle 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. In addition, PPACA subjects providers and suppliers to enhanced screening before allowing them to participate in the Medicare program, and both PPACA and the Reconciliation Act increase funding for anti-fraud activities.

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.



Date of Report: May 27, 2010
Number of Pages: 92
Order Number: R41196
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Thursday, June 3, 2010

Medicare Physician Payment Updates and the Sustainable Growth Rate (SGR) System

Jim Hahn
Analyst in Health Care Financing

Each year since 2002, the statutory method for determining the annual updates to the Medicare physician fee schedule, known as the sustainable growth rate (SGR) system, has resulted in a reduction in the reimbursement rates (or a "negative update"). With the exception of 2002, when a 4.8% decrease was applied, Congress has passed a series of bills to override the reductions. The SGR system was established because of the concern that the Medicare fee schedule itself would not adequately constrain overall increases in spending for physicians' services. While the fee schedule limits the amount that Medicare will pay for each service, there are no limits on the volume or mix of services. The SGR system was intended to serve as a restraint on aggregate spending. If expenditures over a period are less than the cumulative spending target for the period, the update is increased. However, if spending exceeds the cumulative spending target over a certain period, future updates are reduced to bring spending back in line with the target. 

In the first few years of the SGR system, the actual expenditures did not exceed the targets and the updates to the physician were close to the Medicare economic index (MEI, a price index of inputs required to produce physician services) in the first two years (2.3% in 1998 and 1999, compared with a MEI of 2.2% in 1998 and 2.3% in 1999). For the next two years, in 2000 and 2001, the actual physician fee schedule update was more than twice the MEI for those years (5.5% update vs. MEI of 2.4% in 2000, 5.0% update vs. MEI of 2.1% in 2001). However, beginning in 2002, the actual expenditure exceeded allowed targets and the discrepancy has grown with each year, resulting in a series of ever-larger cuts under the formula. 

Some criticisms of the SGR system point to purported flaws in the technical details behind the formula, while others have just expressed displeasure with the resultant outcome. Although modifications have been proposed to replace the SGR system, no proposal has garnered sufficient support and almost all proposals would be expensive to implement compared against the current baseline, which necessarily assumes that significant cuts to the fee schedule will occur. 

Legislative activity in the current session of Congress includes several bills. S. 1776 would have (1) set the update to the conversion factor at 0% for 2010 and in subsequent years, and (2) sunset the SGR system immediately. On October 21, 2009, the cloture motion to proceed to the bill was not invoked by the Senate by a vote of 47-53. H.R. 3961 would create two categories of physician services (evaluation, management, and preventive services in one category with all other physician services in the other), each with its own separate target growth rate and conversion factor update. CBO has estimated that implementing the bill would increase direct spending by about $210 billion over the 2010-2019 period. On November 19, 2009, the House passed H.R. 3961 by a vote of 243-183, but the Senate has yet to take up the bill. The health care reform bill under consideration in the Senate, an amendment in the form of a substitute to H.R. 3590, does not address this issue. The FY2010 Defense Appropriations Act delayed the implementation of the reductions for two months, until February 28, 2010. The Statutory Pay-As-You-Go Act of 2010 (P.L. 111-139) exempts the amount it would cost to freeze payments for five years from PAYGO rules. H.R. 4691, which became law on March 2, 2010, delayed the payment cuts through March 31, 2010. On April 15, the Senate passed an amended version of H.R. 4851 that extended the payment cut delay through May 31, 2010. The House passed the amended bill and the President signed P.L. 111-157 into law that day. 
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Date of Report: May 27, 2010
Number of Pages: 21
Order Number: R40907
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