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Monday, January 30, 2012

Medicaid and the State Children’s Health Insurance Program (CHIP) Provisions in ACA: Summary and Timeline

Evelyne P. Baumrucker
Analyst in Health Care Financing

Cliff Binder
Analyst in Health Care Financing

Elicia J. Herz
Specialist in Health Care Financing

Elayne J. Heisler
Analyst in Health Services


The President signed into law H.R. 3590, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148), on March 23, 2010. Seven days later, a second bill, H.R. 4872, was signed into law by the President to modify ACA. This second law, the Health Care and Education Reconciliation Act of 2010 (HCERA; P.L. 111-152), was signed into law on March 30, 2010. Together these measures constitute what is referred to as the health care reform law, which makes many significant changes to the private and public markets for health insurance, as well as modifies aspects of the publicly financed health care delivery system. It represents the most significant reform to the Medicaid program since its establishment in 1965. This report details some of the major changes to the Medicaid and CHIP programs and provides a timeline of effective dates for these provisions.

In general, the Medicaid law (1) raises Medicaid income eligibility levels for certain people up to 133% of the federal poverty level, (2) adds both mandatory and optional benefits to Medicaid, (3) increases the federal matching payments for certain groups of beneficiaries and for particular services provided, (4) provides new requirements and incentives for states to improve quality of care and encourage more use of preventive services, and (5) makes a number of other Medicaid program changes. Regarding CHIP, the law includes a new requirement for states to maintain their current program structures through FY2019 and extends additional CHIP funding through FY2015.

To help explain the most important Medicaid and CHIP changes, provision descriptions are grouped into the following six major issue areas: eligibility, benefits, financing, program integrity, demonstrations and grant funding, and miscellaneous. Appendix A provides a detailed implementation timeline of the Medicaid and CHIP provisions. Appendix B is a crosswalk between the provision titles and the amending sections of P.L. 111-148 and P.L. 111-152 for all of the Medicaid and CHIP provisions. Finally, Appendix B is a list of abbreviations used in this report and their definitions. This report reflects the Medicaid and CHIP provisions at the time of ACA’s enactment and will not be updated to capture subsequent program guidance, public notices, or rulemaking.



Date of Report: January 18, 2012
Number of Pages: 112
Order Number: R41210
Price: $29.95

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Friday, January 27, 2012

Definition of Income in ACA for Certain Medicaid Provisions and Premium Credits


Janemarie Mulvey, Coordinator
Specialist in Health Care Financing

Evelyne P. Baumrucker
Analyst in Health Care Financing

Bernadette Fernandez
Specialist in Health Care Financing

Christine Scott
Specialist in Social Policy


Under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended), the definition of income for eligibility for certain Medicaid populations and premium credits in the exchanges is based on modified adjusted gross income (MAGI). The initial intent of using MAGI was to standardize the definition of income for Medicaid eligibility purposes to reduce some of the variability and complexity that exists under the current program and to provide consistency between Medicaid and the health insurance exchange. The use of MAGI, however, has raised some concerns among Congress and the Obama Administration, as it excludes some types of income either partially or altogether. Of particular interest has been the potential impact of eligibility for Medicaid and premium credits for early retirees (aged 62 through 64) receiving Social Security benefits, as some or all of their Social Security income may be excluded from the MAGI definition of income. By excluding some types of income, individuals and families with a higher percentage of total income relative to the federal poverty level may qualify for Medicaid and premium credits. A recent cost estimate by the Congressional Budget Office finds that changing the MAGI income calculation to include all Social Security benefits would reduce the deficit by $13 billion over the 2012-2021 period.

On November 21, 2011, President Obama signed into law P.L. 112-56, which will change the definition of income for these programs and include non-taxable Social Security in the definition of MAGI. The new law, however, does not address other forms of non-taxable income that are not currently in the MAGI definition. In evaluating the definition of MAGI, a number of issues might be considered. First, an alternative definition may add complexity compared with the use of MAGI. Specifically, because adjusted gross income (on which MAGI is based) can be computed largely from information on an individual’s federal tax return, verification of income is streamlined. If an alternative definition is used that is not based on tax return information, the administrative complexity of verifying nontaxable income from different sources comes into play. Second, the definition was developed to ensure coordination between Medicaid and premium credits in the health insurance exchange. A change in the definition of income for Medicaid should then also apply to premium credits to ensure consistency between Medicaid and the premium credit offered to selected individuals who purchase private health insurance through the exchanges. Finally, the recent enactment of P.L. 112-56 focused largely on the inclusion of Social Security benefits in income definitions for eligibility purposes. However, most other low-income programs include other types of income (e.g., nontaxable pensions) and asset holdings that are also excluded from MAGI.



Date of Report: January
13, 2012
Number of Pages:
24
Order Number: R4
1997
Price: $29.95

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Health-Related Revenue Provisions in the Patient Protection and Affordable Care Act (ACA)


Janemarie Mulvey
Specialist in Health Care Financing

The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 as amended) will, among other things, raise revenues to pay for expanded health insurance coverage. According to the Joint Committee on Taxation, these health-related provisions are projected to increase federal revenues by about $392 billion over 10 years.

The majority (64%) of the health-related revenues will come from individuals, largely from taxes imposed on higher income tax filers though the Medicare payroll tax and adding an additional tax on net investment income. A much smaller share of revenues derived from individual taxpayers will come from limitations on tax-advantaged accounts (such as flexible spending and health savings accounts) and on the itemized deduction used to pay for health care expenses.

The remaining approximate one-third (36%) of these health-related revenues will be derived from taxes and fees on health insurers, plan administrators, and health companies. Specifically, these revenues include 

          an excise tax on high-cost employer-sponsored health insurance; 
          an annual fee on health insurance providers; 
          an annual fee on manufacturers and importers of brand-name pharmaceuticals; 
          an excise tax on manufacturers and importers of certain medical devices; and 
          an excise tax on indoor tanning services. 
The new law will also limit the deductibility of compensation for health insurance executives. While the provisions above are directly targeted toward firms in the health care sector, there is an additional provision that will affect all employers who provide prescription drug coverage to Medicare beneficiaries, which will eliminate the tax deduction for expenses allocable to the Medicare Part D subsidy to employers.

This report summarizes the health-related revenue provisions in ACA, their effective dates, and, where data are available, potential impacts of these provisions.



Date of Report: January
18, 2012
Number of Pages:
14
Order Number: R4
1128
Price: $29.95

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Community Living Assistance Services and Supports (CLASS) Provisions in the Patient Protection and Affordable Care Act (ACA)


Janemarie Mulvey
Specialist in Health Care Financing

Kirsten J. Colello
Specialist in Health and Aging Policy


Under current law, the majority of paid long-term services and supports (LTSS) 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 long-term care (LTC) insurance is available to provide some financial protection against an individual’s risk of the potentially high cost of LTSS, 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. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) establishes a federally administered voluntary LTC insurance program entitled the Community Living Assistance Services and Supports (CLASS) program. The stated purpose of the CLASS program, among other things, is to provide a financing mechanism for long-term care services that supports personal choice and independence to live in the community. However, a number of concerns have been raised about the long-run sustainability of the program.

Once the CLASS program is established, employed individuals aged 18 and older can voluntarily enroll in the CLASS program. This is a voluntary program and employers would have the option of participating. The ACA specifies two processes for enrollment into the CLASS program. The first is an automatic enrollment process. Within the automatic enrollment process, employers who choose to participate would be responsible for withholding CLASS premiums through payroll deductions. Employees would then have the opportunity to “opt-out” if they do not want to participate. These enrollment procedures for employers in the CLASS program are intended to be similar to those currently established for 401(k) and other similar retirement plans by the Internal Revenue Service. An alternative enrollment process would also be developed for self-employed individuals, those with more than one employer, and those who have an employer that does not elect to participate in the automatic enrollment process.

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. The ACA 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 receive 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. Other benefits include advocacy services, and advice and assistance counseling on accessing and coordinating LTSS.

On October 14, 2011, the Department of Health and Human Services (HHS) sent a letter to Congress stating that after careful examination of how the Administration might implement a long-term financially stable CLASS program, HHS does not see a viable path forward for implementation at this time. More recently, H.R. 1173 was ordered reported by both the House Energy and Commerce and Ways and Means Committees and has been sent to the House floor for consideration. This CRS report first discusses the cost and financing for LTSS and the current market for private LTC insurance. It then details the various CLASS program requirements. Finally, it provides a discussion of the long-run sustainability concerns, the status of implementation, and recent legislative activity.



Date of Report: January
20, 2012
Number of Pages:
21
Order Number: R40
842
Price: $29.95

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Medicare Primer


Patricia A. Davis, Coordinator
Specialist in Health Care Financing

Cliff Binder
Analyst in Health Care Financing

Jim Hahn
Specialist in Health Care Financing

Paulette C. Morgan
Specialist in Health Care Financing

Janemarie Mulvey
Specialist in Health Care Financing

Scott R. Talaga
Analyst in Health Care Financing

Sibyl Tilson
Specialist in Health Care Financing


Medicare is a federal insurance program that pays for covered health care services of qualified beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act as a federal entitlement program to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under 65. Medicare, which consists of four parts (A-D), covers hospitalizations, physician services, prescription drugs, skilled nursing facility care, home health visits, and hospice care, among other services.

Generally, individuals are eligible for Medicare if they or their spouse worked for at least 40 quarters in Medicare-covered employment, are 65 years old, and are a citizen or permanent resident of the United States. Individuals may also qualify for coverage if they are a younger person with a permanent disability, have End-Stage Renal disease (permanent kidney failure requiring dialysis or transplant), or have amyotrophic lateral sclerosis (ALS, Lou Gehrig’s disease). In addition, individuals with one or more specified lung diseases or types of cancer who lived for six months during a specified period prior to diagnosis in an area subject to a public health emergency declaration by the Environmental Protection Agency (EPA) as of June 17, 2009, are also deemed entitled to benefits under Part A and eligible to enroll in Part B.

In FY2012, the program will cover approximately 50 million persons (41 million aged and 9 million disabled) at a total cost of about $566 billion, accounting for approximately 3.5% of GDP. Medicare is an entitlement program, which means that it is required to pay for covered services provided to eligible persons so long as specific criteria are met.

Since 1965, the Medicare program has undergone considerable change. During the 111th Congress, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148) and the Health Care and Education Affordability Reconciliation Act of 2010 (the Reconciliation Act, or HCERA; P.L. 111-152) were signed into law. They made numerous changes to the Medicare program that modify provider reimbursements, provide incentives to increase the quality and efficiency of care, and enhance certain Medicare benefits.

However, in the absence of congressional action, the Medicare program will be unsustainable in the long run. The Hospital Insurance (Part A) trust fund has been estimated to become insolvent in 2024. And although the Supplementary Medical Insurance (Parts B and D) trust fund is financed in large part through federal general revenues and cannot become insolvent, Medicare spending growth will put increasing strains on Congress’s competing priorities.

The 112th Congress may continue to debate the recent changes to Medicare, and may also consider additional legislative action ranging from technical corrections to broader structural changes. Additionally, Congress may consider legislative action to address the 2013-2021 automatic Medicare spending reductions under the Budget Control Act of 2011 (BCA; P.L. 112- 25).



Date of Report: January 19, 2012
Number of Pages: 30
Order Number: R40425
Price: $29.95

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