Private Health Insurance Provisions in PPACA (P.L. 111-148)

Hinda Chaikind
Specialist in Health Care Financing

Bernadette Fernandez
Analyst in Health Care Financing

Mark Newsom
Analyst in Health Care Financing

Chris L. Peterson
Specialist in Health Care Financing

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 P.L. 111-152, the Health Care and Education Reconciliation Act of 2010. This report summarizes the key provisions in PPACA (hereafter referring to PPACA as amended by P.L. 111-152) that affect private health insurance. 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. 

In general, PPACA requires individuals, beginning in 2014, to maintain health insurance, with some exceptions. Individuals will be required to maintain minimum essential coverage, which includes eligible employer coverage, individual coverage, grandfathered plans, and federal programs such as Medicare and Medicaid, among others. Employers are not explicitly required to provide health benefits, although certain employers with more than 50 employees may be required to pay a penalty if either (1) they do not provide insurance, under certain circumstances, or (2) the insurance they provide does not meet specified requirements. Several insurance market reforms will be implemented, including some prior to full implementation in 2014, such as prohibition against lifetime benefit limits and coverage for preexisting health conditions for children. 

In addition to establishing new federal private health insurance standards, PPACA will enable and support states' creation by 2014 of "American Health Benefit Exchanges." An exchange cannot be an insurer, but will provide eligible individuals and small businesses with access to insurers' plans in a comparable way. The exchange will consist of a selection of private plans as well as "multi-state qualified health plans," administered by the Office of Personnel Management. Individuals will only be eligible to enroll in an exchange plan if they are not enrolled in Medicare, Medicaid, or acceptable employer coverage as a full-time employee. Based on income, certain individuals may qualify for a tax credit toward their premium costs and a subsidy for their costsharing; the credits and subsidies will be available only through an exchange. States will have the flexibility to establish basic health plans for low-income individuals not eligible for Medicaid. 

Individual and small group coverage will be allowed to be offered through nonprofit, member-run health insurance companies. Such nonprofit insurers will be eligible for grants and loans distributed through the new Consumer Operated and Oriented Plan (CO-OP) program. .


Date of Report: April 15, 2010
Number of Pages: 52
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Older Americans Act: Funding

Angela Napili
Information Research Specialist

Kirsten J. Colello
Acting Section Research Manager

The Older Americans Act (OAA) is the major federal vehicle for the delivery of social and nutrition services for older persons. These include supportive services, congregate nutrition services (meals served at group sites such as senior centers, community centers, schools, churches, or senior housing complexes), home-delivered nutrition services, family caregiver support, community service employment, the long-term care ombudsman program, and services to prevent the abuse, neglect and exploitation of older persons. The OAA also supports grants to older Native Americans and research, training, and demonstration activities. Funding for most OAA programs is provided through appropriations legislation for the Departments of Labor, Health and Human Services, Education, and Related Agencies (Labor-HHS-Education). 

The FY2010 Consolidated Appropriations Act (P.L. 111-117), signed into law December 16, 2009, provides $2.328 billion for OAA programs in FY2010. 

The FY2009 Omnibus Appropriations Act (P.L. 111-8) provided $2.052 billion for OAA programs for FY2009. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111- 5) provided $220.0 million in additional FY2009 funding ($100.0 million for nutrition programs and $120.0 million for the Title V, Community Service Employment for Older Americans Program, or CSEOA). Total FY2009 OAA funding was $2.272 billion. 

The FY2010 funding level for OAA programs is a 13% increase over the funding provided by the FY2009 Omnibus Appropriations Act, and a 2% increase over total FY2009 funding (including both the Omnibus and ARRA). CSEOA received the bulk of this increased funding. Congress appropriated $825.4 million to CSEOA in FY2010, compared with $691.9 million in FY2009 funding ($571.9 million from the FY2009 Omnibus, and $120.0 million from ARRA). 

The President's FY2011 Budget proposes $2.209 billion for OAA programs, 5% less than the FY2010 level. CSEOA would receive $600.425 million, 27% less than its FY2010 level. 

The FY2011 Budget proposes a $102.5 million Caregiver Initiative that would increase funding for services to help family caregivers. The Caregiver Initiative proposes a $48.0 million increase for supportive services and a $48.0 million increase for family caregiver support services, both under OAA's Title III. The Caregiver Initiative also proposes a $2.0 million increase for Native American supportive services and a $2.0 million increase for Native American caregiver support services, both under Title VI. Finally, the Caregiver Initiative proposes a $2.5 million increase for Lifespan Respite Care. 

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). Among other things, the act appropriates $10 million in mandatory spending for Aging and Disability Resource Centers (ADRCs) through FY2014. It also authorizes additional funding to the aging network, including $15.0 million to ADRCs and $10.0 million to Area Agencies on Aging (AAAs) for outreach and education programs related to Medicare low-income assistance programs. These funds are available for obligation through FY2012. 

This report provides details of FY2010 funding and the FY2011 budget request for OAA as well as for programs such as the Alzheimer's Disease Supportive Services Program (ADSSP) and Lifespan Respite Care Program which are administered by the Administration on Aging (AOA), but authorized under the Public Health Service Act (PHSA).


Date of Report: April 9, 2010
Number of Pages: 27
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Medicare Provisions in PPACA (P.L. 111-148)

Patricia A. Davis, Coordinator
Specialist in Health Care Financing

Jim Hahn
Analyst in Health Care Financing

Paulette C. Morgan
Specialist in Health Care Financing

Holly Stockdale
Analyst 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, basing payment rates in the Medicare Advantage program on average bids, 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: April 21, 2010
Number of Pages: 91
Order Number: R41196
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Health Insurance Continuation Coverage Under COBRA

Janet Kinzer
Information Research Specialist

Meredith Peterson
Information Research Specialist

Most Americans with private group health insurance are covered through an employer, coverage that is generally provided to active employees and their families, and may be extended to retirees. A change in an individual's work or family status can result in loss of coverage. In 1985, Congress enacted legislation to provide temporary access to health insurance for qualified individuals who lose coverage due to such changes. Under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA; P.L. 99-272), an employer with 20 or more employees must provide those employees and their families the option of continuing their coverage under the employer's group health insurance plan in the case of certain events. The coverage, usually for 18 months, can last up to 36 months, depending on the nature of the triggering event. Employers who fail to provide the continued health insurance option are subject to penalties. 

Since the start of the recession in December 2007, the number of unemployed persons has increased by 7.6 million to 15.1 million, and the unemployment rate has doubled to 9.8%. Many of these individuals were eligible to continue their employer-sponsored health insurance, but did not elect coverage under COBRA because of the cost. On average, employees pay 27% of the premium for family coverage under an employer-sponsored health insurance plan. Those extending coverage through COBRA can be required to pay up to 102% of the premium, which averaged $13,643 for a family in 2009. Congress addressed this issue under Title III of the American Recovery and Reinvestment Act (ARRA; P.L. 111-5), which included a temporary 65% subsidy for COBRA premiums. The subsidy is available to individuals who meet the income test and who are involuntarily terminated on or after September 1, 2008, and before May 31, 2010. 

The 111th Congress is currently considering whether to extend COBRA benefits beyond the current coverage. Some argue that even with the subsidy, high premiums make COBRA coverage unaffordable to many. Others maintain that in requiring employers to provide former employees with the option of continuing their health insurance coverage, COBRA has resulted in extra costs for employers (in the form of increased premiums for employers' group health insurance policies), as well as added administrative burdens. 

This report provides background information on continuation health insurance under COBRA and on the COBRA population.


Date of Report: April 16, 2010
Number of Pages: 15
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Medicaid: The Federal Medical Assistance Percentage (FMAP)

Chris L. Peterson
Specialist in Health Care Financing

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 recent years, the fiscal situation of the states has focused attention on Medicaid expenditures, as well as on changes in the federal share, or FMAP. In the 108th Congress, the Jobs and Growth Tax Relief Reconciliation Act of 2003 (P.L. 108-27) provided temporary fiscal relief for states and local governments through a combination of FMAP increases and direct grants. In the 109th Congress, provisions to exclude certain Hurricane Katrina evacuees and their incomes from FMAP calculations and to prevent Alaska's FY2006-FY2007 FMAPs from decreasing were included in the Deficit Reduction Act of 2005 (P.L. 109-171). In the 110th Congress, a temporary FMAP increase was included in economic stimulus legislation that was debated but not adopted at the end of 2008. 

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 (American Workers, State, and Business Relief Act of 2010), which includes a provision to extend the ARRA FMAPs by two quarters, through June 30, 2011. The House may consider the Senate-passed version or participate in a conference to resolve their bills' differences. 

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: April 7, 2010
Number of Pages: 22
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Tax Options for Financing Health Care Reform

Jane G. Gravelle
Senior Specialist in Economic Policy

Several tax options have been proposed to provide financing for health care reform. President Obama has proposed restricting itemized deductions for high-income taxpayers, along with some narrower provisions. H.R. 3962 passed in the House on November 14, 2009; its largest source of increased revenues is from additional income taxes for higher-income taxpayers. On December 24, 2009, the Senate adopted H.R. 3590, whose revenue provisions are similar to those in the bill reported by the Senate Finance Committee (S. 1796). Taxing insurance companies on high-cost employer plans is the largest single source of revenue in that plan. Both plans include healthrelated provisions, including fees or excise taxes, along with some other provisions. 

On February 22, 2010, the Obama Administration released a new compromise proposal, which generally uses H.R. 3590 as a starting point, but offers several changes to the revenue provisions of this bill. The President's proposal would delay the effective date for the tax on high-cost employer plans proposed in H.R. 3590 from 2013 to 2018 and raise the exemption threshold for this tax to $27,500 for families and $10,200 for individuals. In addition, the new plan offered by the Administration would broaden H.R. 3590's proposed increase of the Medicare Hospital Insurance (HI) tax for high-income households by adding a tax on unearned income at a 3.8% rate. On March 22, 2010, the House passed the Senate bill, along with the revenue revisions (H.R. 4872). The President signed H.R. 3590 on March 23 (P.L. 111-148); the Senate and House agreed on H.R. 4872 on March 25, 2010, and it was signed by the President (P.L. 111-152) on March 30. 

Several proposals for revenue, considered during the health care financing debate of 2009, have not been included in legislation reported out by congressional committees. These proposals include eliminating tax benefits from the exclusion of employer-provided health insurance, which has a significant revenue potential, and limiting tax savings to 28% of itemized deductions for the top two brackets, which was the centerpiece of the President's health reform tax proposals. 

These provisions differ in their potential revenue gain, and behavioral and distributional effects. Some proposals are progressive (imposing higher relative burdens on higher income groups), some impose larger relative burdens on lower-income families, and some tend to fall on middleclass groups. The distributional analysis, however, relates only to finance: the total health care program may redistribute in favor of lower-income families even if the revenue sources do not. 

The House bill (H.R. 3962) includes a high-income surtax of 5.4% on income above $1,000,000 (income levels are 50% as large for singles). The proposal would initially raise more than $30 billion per year. One concern that has been raised about this surtax is the effect on small business, entrepreneurship, and job creation; however, much of this income is passive income or income of professions (e.g., stockbrokers, doctors). The proposal also includes some narrower, largely corporate provisions and restrictions on health-related tax expenditures. The Senate bill (H.R. 3590) would impose an excise tax on insurance companies for high-cost employer plans. Most of the remaining revenue is raised from restricting health-related tax expenditures; increasing the Medicare payroll tax for high-income earners; and imposing fees on medical devices, branded drugs, and health insurance providers. 

Witnesses in a round-table discussion held by the Senate Finance Committee in 2009 also discussed a number of other options, including other base-broadening provisions as well as rate increases for the individual income tax, increases in payroll taxes, and new revenue sources such as a value added tax (VAT) and a cap and trade auction system for carbon emission permits.


Date of Report: April 6, 2010
Number of Pages: 33
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Health Care: Constitutional Rights and Legislative Powers

Kathleen S. Swendiman
Legislative Attorney

The health care reform debate raises many complex issues including those of coverage, accessibility, cost, accountability, and quality of health care. Underlying these policy considerations are issues regarding the status of health care as a constitutional or legal right. This report analyzes constitutional and legal issues pertaining to a right to health care, as well as the power of Congress to enact and fund health care programs. Following the recent passage of the Patient Protection and Affordable Care Act, P.L. 111-148, legal issues have been raised regarding the power of Congress to mandate that individuals purchase health insurance, and the ability of states to "nullify" or "opt out" of such a requirement. These issues are also discussed. 

The United States Constitution does not set forth an explicit right to health care. While the Supreme Court would likely find that the Constitution provides a right to obtain health care services at one's own expense from willing providers, the Supreme Court has never interpreted the Constitution as guaranteeing a right to health care services from the government for those who cannot afford it. The Supreme Court has, however, held that the government has an obligation to provide medical care in certain limited circumstances, such as for prisoners. 

While the United States Constitution and Supreme Court interpretations do not identify a constitutional right to health care for those who cannot afford it, Congress has enacted numerous statutes, such as Medicare, Medicaid, and the Children's Health Insurance Program, that establish and define specific statutory rights of individuals to receive health care services from the government. As a major component of many health care entitlement statutes, Congress has provided funding to pay for the health services provided under law. Most of these statutes have been enacted pursuant to Congress's authority to "make all Laws which shall be necessary and proper" to carry out its mandate "to … provide for the … general Welfare." The power to spend for the general welfare is one of the broadest grants of authority to Congress in the U.S. Constitution. The Supreme Court accords considerable deference to a legislative decision by Congress that a particular health care spending program provides for the general welfare. 

Recently, Congress enacted comprehensive health care reform legislation, P.L. 111-148, which includes a requirement that individuals purchase health insurance. Several lawsuits have been filed challenging the power of Congress to enact such a mandate under the Commerce Clause of the U.S. Constitution. In addition, several states have passed laws attempting to "nullify" or "opt out" of the federal individual health insurance mandate in Section 1501 of P.L. 111-148, which goes into effect in 2014. Direct conflicts between federal and state laws would raise constitutional issues which are likely to be resolved in favor of the federal law under the Supremacy Clause of the U.S. Constitution. 

A number of state constitutions contain provisions relating to health and the provision of health care services. State constitutions may provide constitutional rights that are more expansive than those found under the federal Constitution since federal rights set the minimum standards for the states.


Date of Report: April 5, 2010
Number of Pages: 16
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CRS Issue Statement on Health Care Reform

Chris L. Peterson, Coordinator
Specialist in Health Care Financing

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

On March 23, 2010, President Obama signed health reform legislation into law—the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148), some provisions of which were amended by the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). 

Regarding private health insurance, PPACA will be fully implemented in 2014, when most individuals, large employers, and health plans are to meet certain coverage requirements. PPACA will restructure the private health insurance market, particularly for individuals purchasing coverage on their own (who may qualify for premium credits) and small businesses, partly by supporting states' creation of "American Health Benefit Exchanges" through which eligible individuals and small businesses can access private insurers' plans. Private health insurance provisions that take effect prior to 2014 (including some this year) include the following: ending lifetime and unreasonable annual limits on benefits, prohibiting rescissions of health insurance policies, requiring coverage of preventive services and immunizations, extending dependant coverage up to age 26, capping insurance companies' non-medical administrative expenditures, guaranteeing coverage for preexisting health conditions for enrollees under age 19, and providing assistance for those who are uninsured because of a preexisting condition. 

PPACA raises revenues to pay for expanded health insurance coverage by imposing excise taxes and fees on industries in the health care sector, limiting tax-advantaged health accounts, and increasing the Medicare payroll tax on upper-income households and adding an additional tax on net investment income on upper-income households. The new laws will also eliminate the deduction for expenses allocable to the Medicare Part D subsidy. 

PPACA makes numerous changes to the Medicare program that will impact provider reimbursements, provide incentives to increase the quality and efficiency of care, and enhance certain Medicare benefits. For instance, major savings are expected from constraining Medicare's annual payment increases for certain providers, basing payment rates in the Medicare Advantage program on average bids, reducing payments to hospitals that serve a large number of low income patients, and creating an independent Medicare Advisory Board to make changes in Medicare payment rates. 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 bundles 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. Additionally, PPACA increases funding for anti-fraud activities, and subjects providers and suppliers to enhanced screening before allowing them to participate in the Medicare program. 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. 

Beginning in 2014, or sooner at state option, nonelderly, non-pregnant individuals with income below 133% of the federal poverty level (FPL) will be newly eligible for Medicaid. From 2014 to 2016, the federal government will cover 100% of the Medicaid costs of these newly eligible individuals, with the percentage dropping to 90% (with states covering the difference) by 2020. This change represents the most significant expansion of Medicaid eligibility in many years. In addition, the health reform law adds new mandatory benefits to Medicaid, including, for example,coverage of services in free standing birthing centers and tobacco cessation services for pregnant women. The new law also expands state options for providing home and community-based services as an alternative to institutional care and provides financial incentives to states to do so. Among the Medicaid financing changes, the health reform law reduces Medicaid disproportionate share hospital (DSH) allotments, increases certain pharmacy reimbursements, increases primary care physician payment rates for selected preventive services, and increases federal spending for the territories. 

The new law maintains the current structure of the State Children's Health Insurance Program (CHIP) and extends federal appropriations for two years, through FY2015. States will receive higher federal matching rates for CHIP services beginning in FY2016 (if federal CHIP funds are available). States are required to maintain CHIP eligibility levels through FY2019 as a condition of receiving federal matching funds for Medicaid expenditures (notwithstanding the lack of corresponding federal CHIP appropriations for FY2016 and beyond), with some exceptions. Beginning in 2016, in the absence of additional federal allotments, CHIP children will obtain coverage under Medicaid (if eligible) or in qualified health plans (with coverage and cost-sharing protections comparable to CHIP currently) through the state-based exchanges. 

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 public 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.

Additional resources can be found here: http://www.pennyhill.net/documents/health_care_reform.pdf

Date of Report: April 6,, 2010
Number of Pages: 5
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Regulations Pursuant to the Patient Protection and Affordable Care Act (P.L. 111-148)

Curtis W. Copeland
Specialist in American National Government

Federal regulations generally start with an act of Congress, and are the means by which statutes are implemented and many specific requirements are established. The Patient Protection and Affordable Care Act (PPACA, P.L. 111-148, March 23, 2010) is a recent and particularly noteworthy example of congressional delegation of rulemaking authority to federal agencies. This report identifies more than 40 provisions in PPACA (as amended by the Health Care and Education Reconciliation Act of 2010, P.L. 111-152, March 30, 2010) that require, permit, or contemplate rulemaking by federal agencies to implement the legislation. 

Where new regulations are required in PPACA, this report also describes provisions in the act that prescribe the substance of certain regulations, procedural requirements regarding the development of those rules, and provisions that establish regulatory deadlines. Where PPACA permits, but does not require, certain regulations, the amount of discretion provided to the agencies appears to vary, as well as the implications of that discretion. In some cases, the agencies appear able to decide whether to take any action, and if so, whether that action takes the form of a regulation or some other method of policy implementation (e.g., adjudication, policy statements, guidance, or memoranda). Other sections in PPACA do not specifically require or permit the development of regulations, instead referring to regulations "issued by the Secretary" or "promulgated by the Secretary." If these sections refer to existing rules, then new regulations may not be needed. 

The report indicates that PPACA gives federal agencies substantial responsibility and authority to "fill in the details" of the legislation through subsequent regulations. Although some regulations are required in 2010, it seems likely that other regulations will be issued for years, or even decades to come. Also, although Congress delegates rulemaking authority for a variety of reasons, the manner in which Congress does so can determine who makes those decisions, and in what manner. When Congress requires that a regulation be issued or made effective by a particular date, that it contain certain substantive elements, and that the rule be developed following certain procedures, then the delegation of legislative rulemaking authority is somewhat limited and Congress retains a measure of control over the subsequent policymaking process. On the other hand, Congress grants substantial discretion to the regulatory agencies when it gives the heads of those agencies broad authority to "prescribe such regulations as may be necessary." Even more discretion may be given to the agencies when Congress permits agencies to decide certain threshold issues. While the regulations are being developed, or after they are issued, Congress and individual Members have various oversight options, including oversight hearings, meeting with agency officials and filing comments, the Congressional Review Act, and restrictions on agency appropriations.


Date of Report: April 13, 2010
Number of Pages: 26
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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 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. Most recently, a Senate-amended version of H.R. 4213 would extend the delay through September 30, 2010, while a House-amended version of H.R. 4851 would extend the delay through April 30, 2010.


Date of Report: April 9 2010
Number of Pages: 20
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Centers for Disease Control and Prevention Global Health Programs: FY2001-FY2011

Tiaji Salaam-Blyther
Specialist in Global Health

A number of U.S. agencies and departments implement U.S. government global health interventions. Overall, U.S. global health assistance is not always coordinated. Exceptions to this include U.S. international responses to key infectious diseases; for example, U.S. programs to address HIV/AIDS through the President's Emergency Plan for AIDS Relief (PEPFAR), malaria through the President's Malaria Initiative (PMI), and avian and pandemic influenza through the Avian Flu Task Force. Although several U.S. agencies and departments implement global health programs, this report focuses on funding for global health programs conducted by the U.S. Centers for Disease Control and Prevention (CDC), a key recipient of U.S. global health funding. 

Congress appropriates funds to CDC for its global health efforts through five main budget lines: Global HIV/AIDS, Global Immunization, Global Disease Detection, Malaria, and Other Global Health. Although Congress provides funds for some of CDC's global health efforts through the above-mentioned budget lines, CDC does not, in practice, treat its domestic and global programs separately. Instead, the same experts are mostly used in domestic and global responses to health issues. As such, CDC often leverages its own resources in response to global requests for technical assistance in a number of areas that also have domestic components, such as outbreak response; the prevention and control of injuries and chronic diseases; emergency assistance and disaster response; environmental health; reproductive health; and safe water, hygiene, and sanitation. 

President Barack Obama has indicated early in his Administration that global health is a priority and that his Administration would continue to focus global health efforts on addressing HIV/AIDS. When releasing his FY2010 budget request, President Obama indicated that his Administration would increase investments in global health programs and, through his Global Health Initiative, improve the coordination of all global health programs. The President requested that in FY2011, Congress appropriate $353 million to CDC for global health programs—an estimated 5% increase over FY2010 enacted levels. From FY2001 to FY2010, Congress made available more than $3 billion available to CDC for global health programs. 

CDC also partners in programs for which it does not have specific appropriations, such as global efforts to address tuberculosis (TB) and respond to pandemic influenza. In addition, the State Department and the U.S. Agency for International Development (USAID) transfer funds to CDC for its role as an implementing partner in U.S. coordinated initiatives, including PEPFAR, PMI, and the Neglected Tropical Diseases (NTD) Initiative. 

There is a growing consensus that U.S. global health assistance needs to become more efficient and effective. There is some debate, however, on the best strategies. This report explains the role CDC plays in U.S. global health assistance, highlights how much the agency has spent on global health efforts from FY2001 to FY2010, and discusses how funding to each of its programs has changed during this period. For more information on U.S. funding for other global health efforts, including those implemented by USAID, the Department of Defense (DOD), and the Global Fund to Fight AIDS, Tuberculosis, and Malaria (Global Fund) and debates about making U.S. global health assistance more efficient, see CRS Report R40740, U.S. Global Health Assistance: Background, Priorities, and Issues for the 111thCongress

Date of Report: April 7 2010
Number of Pages: 26
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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, after more than a year of legislative deliberation, 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 of 2009 (H.R. 3596), which would limit antitrust exemptions provided by the McCarran-Ferguson Act (P.L. 79-15). 

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: April 8 2010
Number of Pages: 67
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Health Care Reform and Small Business

Jane G. Gravelle
Senior Specialist in Economic Policy

An issue in the development of the new health care reform legislation is the effect on small business. One concern is the effect of a "pay or play" mandate to require firms to provide health insurance for their employees or pay a penalty. Current proposals have exemptions for small businesses, and also propose to provide subsidies for purchasing insurance. Economic theory suggests that health insurance costs (and any penalties) should be passed on to labor income, but that may be more difficult for employers of lower-wage workers. Furthermore, average wages are generally smaller for small firms (except for the smallest). A second concern is the potential effect of taxes on high-income individuals on small business. 

Both the House bill (H.R. 3962, passed on November 14, 2009) and the Senate bill (H.R. 3590, passed on December 24, 2009) would exempt small businesses from penalties. On March 22, 2010, the House passed the Senate bill (H.R. 3590) and the President signed it on March 23, 2010 (P.L. 111-148). The House bill would have applied no penalties to firms with $500,000 or less in payroll; the Senate bill exempts firms with 50 or fewer employees. While both proposals would exempt most firms, the Senate bill would exempt more, probably around 95%, and the share of firms that would not be affected either because they are exempt or because they already offer insurance would be larger, probably around 98%. About 20% of employees work for firms that were estimated to be affected. 

Along with adopting the Senate proposal, the House passed a separate measure, H.R. 4872, which would alter the penalties and revenue sources in H.R. 3590; it was adopted with some modifications on March 25, and signed by the President on March 30 (P.L. 111-152). The penalties in the original Senate bill were per-employee flat dollar amounts of $750 a year for firms that do not offer coverage, triggered if one or more employees are eligible for the premium credit for lower- income families. They are relatively small compared with the cost of health insurance. The reconciliation proposal would impose a larger penalty of $2,000 per employee, but exempt the first 30 employees. Firms that offer insurance also will pay penalties if their employees enroll in individuals plans and receive the premium credit, only for those employees. The penalties appear smaller than those in the House proposals, which are calculated as a percentage of payroll. The proposals also provide temporary credits to subsidize small employers' contributions to insurance for lower-income employees that depend on firm size and employee compensation. The credits are the same in the two bills (except that the Senate bill allows a higher compensation phaseout), and would be as much as 50% of the employer's cost. The subsidy for taxable firms is provided as a nonrefundable income tax credit and would not benefit firms with no income tax liability; the Senate bill, however, has a separate 35% credit for nonprofits. 

The original Senate proposal had increased Medicare taxes on earned income on married couples with incomes over $250,000 and singles with incomes over $200,000 by 0.9 percentage points. H.R. 4872 extends the Medicare tax on high-income individuals to passive investment income by taxing that income at 3.8%. Some concerns had been raised earlier about the effect on small business of a high-income surcharge in the House bill, which would have imposed (for couples) at 5.4% on incomes over $1 million ($500,000 for singles). The surcharge would have affected 0.3% of taxpayers and 1.2% of unincorporated businesses. The Medicare tax on investment affects a larger total share of the population (2.6%) but is imposed at a smaller rate and is not likely to fall on small business owners whose capital is invested in their business because this income is either already subject to Medicare or is exempt.


Date of Report: April 8 2010
Number of Pages: 18
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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 Policy

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, H.R. 4691, the Temporary Extension Act of 2010, was enacted into law and extends eligibility for COBRA premiums subsidies to individuals who are involuntarily terminated through March 31, 2010. 

Under current law, individuals who are involuntarily terminated on or after April 1, 2010, would not be eligible for the COBRA premium subsidy. A number of legislative proposals have been introduced to extend eligibility for COBRA premium subsidies beyond March 31. On March 10, the Senate passed H.R. 4213, the American Workers, State, and Business Relief Act, which extends eligibility for COBRA premium subsidy to individuals who lose their jobs on or before December 31, 2010. Because the original bill, H.R. 4213, was amended by the Senate in the nature of a substitute, the Senate-passed version must now go back to the House for consideration. On March 17, the House passed H.R. 4851 to extend eligibility for the COBRA premium subsidy to individuals who are involuntarily terminated through April 30, 2010. 

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. .


Date of Report: April 9 2010
Number of Pages: 15
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Unemployment and Health Insurance: Current Legislation and Issues

Janemarie Mulvey
Specialist in Aging Policy

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). However, the COBRA premium subsidy recently expired for those unemployed after March 31, 2010. To address this issue, two legislative proposals have been introduced and passed by at least one chamber of Congress. On March 10, the Senate passed H.R. 4213, the American Workers, State and Business Relief Act, which would extend eligibility for COBRA premium subsidy to individuals who lose their jobs on or before December 31, 2010. On March 17, the House passed H.R. 4851 to extend eligibility for the COBRA premium subsidy to individuals who are involuntarily terminated through April 30, 2010. 

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: April 9 2010
Number of Pages: 20
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Medical Marijuana: Review and Analysis of Federal and State Policies

Mark Eddy
Specialist in Social Policy


The issue before Congress is whether to continue the federal prosecution of medical marijuana patients and their providers, in accordance with the federal Controlled Substances Act (CSA), or whether to relax federal marijuana prohibition enough to permit the medicinal use of botanical cannabis products when recommended by a physician, especially where permitted under state law.

Fourteen states, mostly in the West, have enacted laws allowing the use of marijuana for medical purposes, and many thousands of patients are seeking relief from a variety of serious illnesses by smoking marijuana or using other herbal cannabis preparations.

Two bills relating to the therapeutic use of cannabis have been introduced in the 111th Congress. The Medical Marijuana Patient Protection Act (H.R. 2835), which would allow the medical use of marijuana in states that permit its use with a doctor's recommendation, was introduced on June 11, 2009, by Representative Barney Frank. The bill would move marijuana from Schedule I to Schedule II of the CSA and exempt from federal prosecution authorized patients and medical marijuana providers who are acting in accordance with state laws. Also, the Truth in Trials Act (H.R. 3939), a bill that would make it possible for defendants in federal court to reveal to juries that their marijuana activity was medically related and legal under state law, was introduced on October 27, 2009, by Representative Sam Farr.

For the first time since District of Columbia residents approved a medical marijuana ballot initiative in 1998, a rider blocking implementation of the initiative was not attached to the D.C. appropriations act for FY2010 (P.L. 111-117), clearing the way for the creation of a medical marijuana program for seriously ill patients in the nation's capital.

The Obama Administration Department of Justice, in October 2009, announced an end to federal raids by the Drug Enforcement Administration of medical marijuana dispensaries that are operating in "clear and unambiguous compliance with existing state laws." This move fulfills a pledge to end such raids that was made by candidate Obama during the presidential campaign.

Claims and counterclaims about medical marijuana—much debated by journalists and academics, policymakers at all levels of government, and interested citizens—include the following: Marijuana is harmful and has no medical value; marijuana effectively treats the symptoms of certain diseases; smoking is an improper route of drug administration; marijuana should be rescheduled to permit medical use; state medical marijuana laws send the wrong message and lead to increased illicit drug use; the medical marijuana movement undermines the war on drugs; patients should not be arrested for using medical marijuana; the federal government should allow the states to experiment and should not interfere with state medical marijuana programs; medical marijuana laws harm the federal drug approval process; the medical cannabis movement is a cynical ploy to legalize marijuana and other drugs. With strong opinions being expressed on all sides of this complex issue, the debate over medical marijuana does not appear to be approaching resolution.

Date of Report: April 2, 2010
Number of Pages: 51
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Grandfathered Health Plans Under PPACA (P.L. 111-148)

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) 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 addresses issues regarding the discontinuation of grandfathered plans and interaction with the individual mandate. 

What Is a Grandfathered Health Plan? 

A grandfathered health plan is an existing group health plan1 or health insurance coverage (including coverage from the individual health insurance market) in which a person was enrolled on the date of enactment. Therefore, as long as a person was enrolled in a health insurance plan on March 23, 2010, that plan has been grandfathered. 

Who Is Allowed Coverage Under a Grandfathered Health Plan? 

Current enrollees in grandfathered health plans are allowed to re-enroll in that plan, even if renewal occurs after date of enactment. Family members are allowed to enroll in the grandfathered plan, if such enrollment is permitted under the terms of the plan in effect on the date of enactment. For grandfathered group plans, new employees (and their families) may enroll in such plans. 

What Insurance Reforms Are Imposed on Grandfathered Health Plans? 

Grandfathered health plans are exempt from the vast majority of the new insurance reforms. However, grandfathered plans are subject to a handful of requirements with different effective dates.2


Date of Report: April 7, 2010
Number of Pages: 5
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Medicaid and CHIP: Changes Made by the Health Care and Education Reconciliation Act of 2010 (HCERA, P.L. 111-152) to the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148)

Evelyne P. Baumrucker, Coordinator
Analyst in Health Care Financing

Cliff Binder, Coordinator
Analyst in Health Care Financing

Julie Stone
Specialist in Health Care Financing

Elicia J. Herz
Specialist in Health Care Financing

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. PPACA will, among other changes, modify Medicaid and the Children's Health Insurance Program (CHIP) statutes. In addition, on March 21, 2010, the House passed an amendment in the nature of a substitute to H.R. 4872, the Health Care and Education Reconciliation Act of 2010 (HCERA, P.L. 111-152). After being passed by the House, HCERA was subsequently amended and passed by the Senate before being approved again by the House on March 25, 2010. HCERA was signed by the President on March 30, 2010. HCERA, which amends PPACA, combined with PPACA form the health care reform law. 

HCERA includes the following two titles: (1) Coverage, Medicare, Medicaid, and Revenues, and (2) Education and Health. Title I contains provisions related to health care and revenues, including modifications made by HCERA to PPACA. Title II includes amendments to the Higher Education Act of 1965, which authorizes most of the federal programs involving postsecondary education, and other health amendments, which include other changes to PPACA. 

This report provides a brief summary of PPACA followed by a discussion of the modifications made to the Medicaid and CHIP provisions by HCERA. This report reflects legislative language in HCERA as passed by the House on March 25, 2010. Selected highlights of the Medicaid and CHIP amendments made by HCERA to PPACA include the following: 

• primary care physician payment rates for selected patient treatments were increased; 

• the definition of the average manufacturer price (AMP) was revised to help make AMP more closely reflect manufacturers' average prices; 

• the effective date of the Community First Choice Option was delayed; 

• state FMAP rates for newly eligible populations were changed, as were income counting rules for certain populations; 

• the territories' spending rate caps were increased beginning with the second quarter of FY2011; 

• additional program integrity funding was provided through indexing of the Medicaid Integrity Program for fiscal years beginning with FY2010; and 

• Medicaid Disproportionate Share Hospital (DSH) payment reductions were modified. 


Date of Report: April 1, 2010
Number of Pages: 15
Order Number: R41125
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Selected Health Funding in the American Recovery and Reinvestment Act of 2009

C. Stephen Redhead, Coordinator
Acting Section Research Manager

Elayne J. Heisler
Analyst in Health Services

Sarah A. Lister
Specialist in Public Health and Epidemiology

Bernice Reyes-Akinbileje
Analyst in Health Resources and Services

Amanda K. Sarata
Specialist in Health Policy and Genetics

Pamela W. Smith
Analyst in Biomedical Policy

Roger Walke
Specialist in American Indian Policy

The American Recovery and Reinvestment Act of 2009 (ARRA), the economic stimulus legislation signed into law on February 17, 2009 (P.L. 111-5), included supplemental FY2009 discretionary appropriations for biomedical research, public health, and other health-related programs within the Department of Health and Human Services (HHS). Generally, the appropriations are to remain available through September 30, 2010. P.L. 111-5 also incorporated new authorizing language to promote health information technology (HIT) and established a federal interagency advisory panel to coordinate comparative effectiveness research. 

As enacted, ARRA included $17.15 billion for community health centers, health care workforce training, biomedical research, comparative effectiveness research, HIT, disease prevention, and Indian health facilities. This report discusses the health-related programs and activities funded by ARRA and provides details on how the administering HHS agencies and offices are allocating, awarding, and spending the funds. It will be regularly updated as new information becomes available.


Date of Report: March 30, 2010
Number of Pages: 25
Order Number: R40181
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Summary of Potential Employer Penalties Under PPACA (P.L. 111-148)

Hinda Chaikind
Specialist in Health Care Financing

Chris L. Peterson
Specialist in Health Care Financing

This report provides a description and illustrations of 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 equivalents 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 not "affordable." 

Application Only to "Large Employers" 

To be subject to these penalties regarding employer-sponsored health insurance, an employer must be a "large employer," defined as having "at least 50 full-time employees during the preceding calendar year."2 "Full-time employees" are defined as those working 30 or more hours per week.3 The number of full-time employees excludes those full-time seasonal employees who work for less than 120 days during the year.4 

The hours worked by part-time employees (i.e., those working less than 30 hours per week) are included in the calculation of a large employer, on a monthly basis. This is done by taking their total number of monthly hours worked divided by 120. 

For example, a firm has 35 full-time employees (30+ hours). In addition, the firm has 20 parttime employees who all work 24 hours per week (96 hours per month). These part-time employees' hours would be treated as equivalent to 16 full-time employees, based on the following calculation: 

20 employees x 96 hours / 120 = 1920 / 120 = 16 

Thus, in this example, the firm would be considered a "large employer," based on a total full-time equivalent count of 51—that is, 35 full-time employees plus 16 full-time equivalents based on part-time hours. However, in terms of calculating potential penalties below, part-time hours and part-time employees are not included; only the actual 35 full-time employees would be counted.


Date of Report: April 5, 2010
Number of Pages: 5
Order Number: R41159
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Summary of Small Business Health Insurance Tax Credit Under PPACA (P.L. 111-148)

Chris L. Peterson
Specialist in Health Care Financing

Hinda Chaikind
Specialist in Health Care Financing

This report provides a description of the small business tax credit and illustrations of the phase-out for qualifying employers' contributions toward their workers' health insurance premiums, based on §1421 and §10105(e) of the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148). This credit is available to for-profit and nonprofit employers with fewer than 25 full-time equivalent employees with average annual wages of less than $50,000. 

Type of Credit 
Under PPACA, certain small employers will be eligible for a tax credit, provided they contribute a uniform percentage of at least 50% toward their employees' health insurance. For nonprofit (tax-exempt) organizations, the credit will be in the form of a reduction in income and Medicare tax the employer is required to withhold from employees' wages and the employer share of Medicare tax on employees' wages (with the credit thus limited by these amounts). For all other qualifying employers, it will be in the form of a general business credit. This type of credit is not refundable, but is limited by the for-profit employer's actual tax liability. In other words, if a forprofit company had a year in which it ended up paying no taxes (i.e., it had no taxable income, after accounting for all its other deductions and credits), then the small business tax credit could not be used for that year; there would be no income tax for this credit to reduce. However, as a general business credit, an unused credit amount can generally be carried forward up to 20 years. For for-profit employers, "the credit can be reflected in determining estimated tax payments for the year to which the credit applies in accordance with regular estimated tax rules."1 

Eligible Small Employers 
Full Credit 
In each of the four years 2010 through 2013, the full (or maximum) credit will cover up to 35% of a qualified for-profit employer's contributions2 to health insurance. For example, if an employer paid for 60% of premiums, the maximum small business tax credit through 2013 will be equivalent to 35% of the employer contribution (or 21% of the total premium in this example— i.e., 35% of 60%). In this case, assume the average total premium for this employer was $7,500, and the employer's contribution was $4,500 (60%) per FTE, the maximum tax credit would be $1,575 per FTE (35% of $4,500).3 For nonprofit employers, the maximum credit through 2013 is 25% (rather than 35%) of the employer's contribution.


Date of Report: April 5, 2010
Number of Pages: 5
Order Number: R41158
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Health Insurance Coverage: Characteristics of the Insured and Uninsured in 2008

Chris L. Peterson
Specialist in Health Care Financing

Based on data from the Census Bureau's Current Population Survey (CPS), 46.3 million people in the United States had no health insurance in 2008—an increase of approximately 0.6 million people when compared with 2007. The percentage of people covered by employment-based coverage dropped significantly, as it has every year but one since 2000. Whether the uninsured rate rose in response has depended on how much of the employment-based decrease was offset by increases in public coverage. In 2008, Medicare and Medicaid coverage rates increased, and the uninsured rate rose by one-tenth of a percentage point, to 15.4% in 2008. Mostly because of Medicare, only 1.7% of those age 65 and older were uninsured in 2008. In contrast, 17.3% of those under age 65 were uninsured. Among the nonelderly uninsured, half were in families with a full-time, full-year worker. Young adults were more likely to be uninsured than any other age group, and Hispanic individuals had the highest uninsured rate among race/ethnicity groups.

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Date of Report: April 1, 2010
Number of Pages: 11
Order Number: 96-891
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Indian Health Care Improvement Act Provisions in the Patient Protection and Affordable Care Act (P.L. 111-148)

Elayne J. Heisler
Analyst in Health Services

Roger Walke
Specialist in American Indian 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 new law will, among other things, reauthorize the Indian Health Care Improvement Act (IHCIA). In addition, it makes several changes related to American Indians and Alaska Natives enrolled in and receiving services from the Medicare, Medicaid, and Children's Health Insurance Program (CHIP)—also called Social Security Act (SSA) health benefit programs. 

IHCIA authorizes many programs and services provided by the Indian Health Service (IHS), it sets out the national policy for health services administered to Indians, and it states the federal goal to ensure the highest possible health status for Indians, including urban Indians. In addition, it authorizes direct collections from Medicare, Medicaid, and other third-party insurers. This report, one of a series of CRS products on PPACA, summarizes some of the key changes made in the reauthorization of IHCIA. In addition, the report summarizes the provisions related to American Indians and Alaska Natives enrolled in and receiving services from SSA health benefit programs. 

PPACA will extend the authorizations of appropriations for IHCIA programs indefinitely. It will also permit tribal organizations (TOs) and urban Indian organizations (UIOs) to apply for contract and grant programs for which they were not previously eligible. The law also expands the mental health services authorized under IHCIA to create comprehensive behavioral health and treatment programs. In addition, it requires IHS to establish new programs related to youth suicide prevention and requires demonstration projects to construct modular and mobile health facilities in order to expand health services available through IHS, Indian Tribes (ITs), and TOs. 

With regard to SSA health benefit programs, PPACA permits specified Indian entities to determine Medicaid and CHIP eligibility and extends the period during which IHS, IT, and TO services are reimbursed for all Medicare Part B services, indefinitely, beginning January 1, 2010. Under current law, authority for these facilities to receive Medicare Part B reimbursements for certain specified services expired on January 1, 2010. 

PPACA also makes several organizational changes to IHS. IHS is required to establish an Office of Direct Service Tribes to serve tribes that receive their health care and other services directly from IHS as opposed to receiving services through IHS-funded facilities or programs operated by ITs or TOs. In addition, the bill requires a plan to establish a new area office to serve tribes in Nevada and a new IHS Director of HIV/AIDS Prevention and Treatment.


Date of Report: March 30, 2010
Number of Pages: 14
Order Number: R41152
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Public Health, Workforce, Quality, and Related Provisions in the Patient Protection and Affordable Care Act (P.L. 111-148)

C. Stephen Redhead, Coordinator
Acting Section Research Manager

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

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). Health care reform has 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 are seen to require changes to both the financing and delivery of health care. 

Both the House and the Senate passed comprehensive health care reform bills last year. The House approved the Affordable Health Care for America Act (H.R. 3962) on November 7, 2009. The Senate then passed its own health reform legislation, the Patient Protection and Affordable Care Act (H.R. 3590, as amended), on December 24, 2009. H.R. 3590, as passed by the Senate, was approved by the House on March 21, 2010, and sent to the President. The House also approved an accompanying reconciliation bill, the Health Care and Education Reconciliation Act of 2010 (H.R. 4872). The reconciliation bill would change several controversial elements in PPACA and otherwise amend the new law so that its budgetary impact meets the reconciliation instructions in last year's budget resolution. H.R. 4872 is being considered by the full Senate. This report, one of a series of CRS products on PPACA, summarizes the new law's workforce, prevention, quality, and related provisions. 

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 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.


Date of Report: March 24, 2010
Number of Pages: 108
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Health Care Reform and Small Business

Jane G. Gravelle
Senior Specialist in Economic Policy

An issue in the development of the new health care reform legislation is the effect on small business. One concern is the effect of a "pay or play" mandate to require firms to provide health insurance for their employees or pay a penalty. Current proposals have exemptions for small businesses, and also propose to provide subsidies for purchasing insurance. Economic theory suggests that health insurance costs (and any penalties) should be passed on to labor income, but that may be more difficult for employers of lower-wage workers. Furthermore, average wages are generally smaller for small firms (except for the smallest). A second concern is the potential effect of taxes on high-income individuals on small business. 

Both the House bill (H.R. 3962, passed on November 14, 2009) and the Senate bill (H.R. 3590, passed on December 24, 2009) would exempt small businesses from penalties. On March 22, 2010, the House passed the Senate bill (H.R. 3590) and the President signed it on March 23. The House bill would have applied no penalties to firms with $500,000 or less in payroll; the Senate bill exempts firms with 50 or fewer employees. While both proposals would exempt most firms, the Senate bill would exempt more, probably around 95%, and the share of firms that would not be affected either because they are exempt or because they already offer insurance would be larger, probably around 98%. About 20% of employees work for firms that were estimated to be affected. 

Along with adopting the Senate proposal, the House passed a separate measure, H.R. 4872, which would alter the penalties and revenue sources in H.R. 3590.The penalties in the Senate bill are per-employee flat dollar amounts of $750 a year for firms that do not offer coverage, triggered if one or more employees are eligible for the premium credit for lower- income families. They are relatively small compared with the cost of health insurance. The reconciliation proposal would impose a larger penalty of $2,000 per employee, but exempt the first 30 employees. Firms that offer insurance also will pay penalties if their employees enroll in individuals plans and receive the premium credit, only for those employees. The penalties appear smaller than those in the House proposals, which are calculated as a percentage of payroll. The proposals also provide temporary credits to subsidize small employers' contributions to insurance for lower-income employees that depend on firm size and employee compensation. The credits are the same in the two bills (except that the Senate bill allows a higher compensation phaseout), and would be as much as 50% of the employer's cost. The subsidy for taxable firms is provided as a nonrefundable income tax credit and would not benefit firms with no income tax liability; the Senate bill, however, has a separate 35% credit for nonprofits. 

The original Senate proposal had increased Medicare taxes on earned income on married couples with incomes over $250,000 and singles with incomes over $200,000 by 0.9 percentage points. H.R. 4872 extends the Medicare tax on high-income individuals to passive investment income by taxing that income at 3.8%. Some concerns had been raised earlier about the effect on small business of a high income surcharge in the House bill, which would have imposed (for couples) at 5.4% on incomes over $1 million ($500,000 for singles). The surcharge would have affected 0.3% of taxpayers and 1.2% of unincorporated businesses. The Medicare tax on investment affects a larger total share of the population (2.6%) but is imposed at a smaller rate and is not likely to fall on small business owners whose capital is invested in their business because this income is either already subject to Medicare or is exempt.


Date of Report: March 23, 2010
Number of Pages: 17
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Tax Options for Financing Health Care Reform

Jane G. Gravelle
Senior Specialist in Economic Policy

Several tax options have been proposed to provide financing for health care reform. President Obama has proposed restricting itemized deductions for high-income taxpayers, along with some narrower provisions. H.R. 3962 passed in the House on November 14, 2009; its largest source of increased revenues is from additional income taxes for higher-income taxpayers. On December 24, 2009, the Senate adopted H.R. 3590, whose revenue provisions are similar to those in the bill reported by the Senate Finance Committee (S. 1796). Taxing insurance companies on high-cost employer plans is the largest single source of revenue in that plan. Both plans include healthrelated provisions, including fees or excise taxes, along with some other provisions. 

On February 22, 2010, the Obama Administration released a new compromise proposal, which generally uses H.R. 3590 as a starting point, but offers several changes to the revenue provisions of this bill. The President's proposal would delay the effective date for the tax on high-cost employer plans proposed in H.R. 3590 from 2013 to 2018 and raise the exemption threshold for this tax to $27,500 for families and $10,200 for individuals. In addition, the new plan offered by the Administration would broaden H.R. 3590's proposed increase of the Medicare Hospital Insurance (HI) tax for high-income households by adding a tax on unearned income at a 3.8% rate. On March 22, 2010, the House passed the Senate bill, along with the revenue revisions (H.R. 4872). The President is expected to sign H.R. 3590 on March 23; the Senate will consider the revisions (H.R. 4872) under reconciliation. 

Several proposals for revenue, considered during the health care financing debate of 2009, have not been included in legislation reported out by congressional committees. These proposals include eliminating tax benefits from the exclusion of employer-provided health insurance, which has a significant revenue potential, and limiting tax savings to 28% of itemized deductions for the top two brackets, which was the centerpiece of the President's health reform tax proposals. 

These provisions differ in their potential revenue gain, and behavioral and distributional effects. Some proposals are progressive (imposing higher relative burdens on higher income groups), some impose larger relative burdens on lower-income families, and some tend to fall on middleclass groups. The distributional analysis, however, relates only to finance: the total health care program may redistribute in favor of lower-income families even if the revenue sources do not. 

The House bill (H.R. 3962) includes a high-income surtax of 5.4% on income above $1,000,000 (income levels are 50% as large for singles). The proposal would initially raise more than $30 billion per year. One concern that has been raised about this surtax is the effect on small business, entrepreneurship, and job creation; however, much of this income is passive income or income of professions (e.g., stockbrokers, doctors). The proposal also includes some narrower, largely corporate provisions and restrictions on health-related tax expenditures. The Senate bill (H.R. 3590) would impose an excise tax on insurance companies for high-cost employer plans. Most of the remaining revenue is raised from restricting health-related tax expenditures; increasing the Medicare payroll tax for high-income earners; and imposing fees on medical devices, branded drugs, and health insurance providers. 

Witnesses in a round-table discussion held by the Senate Finance Committee in 2009 also discussed a number of other options, including other base-broadening provisions as well as rate increases for the individual income tax, increases in payroll taxes, and new revenue sources such as a value added tax (VAT) and a cap and trade auction system for carbon emission permits.


Date of Report: March 23, 2010
Number of Pages: 33
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