HHS, Congress, the Courts and the Year Ahead

This is a good summary of the key health care regulatory, legislative and judicial decisions upcoming in the next 12 months…

Daily News

News Analysis

HHS Plans Full Reg Agenda As Reform Law Faces Political, Legal Challenges In 2011

HHS is moving forward with an aggressive health reform regulatory agenda – including defining the parameters of the exchanges and what constitutes “essential” health benefits — even as congressional Republicans are looking for ways to cut off funds for the new law, newly elected governors are struggling with how to fit reform mandates into tight budgets and the courts are considering whether one of the law’s central tenets is constitutional. This will be a pivotal year in which all three branches of the federal government, as well as every state government, have the potential to dramatically affect health reform, sources say.

It’s been almost a year since Scott Brown’s victory in the Massachusetts special election supposedly killed health care reform for good — and though it’s now the law of the land, its long-term survival — and whether it works — may depend in large part on the policy and political battles of the next 12 months.

The following news analysis, by IHP’s Sam Baker, offers a look ahead to key policy developments expected in 2011, based on documents, sources and prior reporting by Inside Health Policy and its sister news site Inside Health Reform.


HHS’ agenda for 2011 includes several major health reform regulations as well as continued work on longer-term issues such as the development of state-based insurance exchanges, sources say. And plenty of work remains to be done on regulations that were issued in 2010 — for instance, HHS will spend this year collecting data on limited-benefit plans, also known as “mini-meds,” before deciding how to apply new medical loss ratio rules to those plans in 2012. The department also set aside this year as a sort of transition period for rate review, establishing a uniform trigger for review in 2011 but pledging to revise the standard with more state-specific criteria based on the data gathered this year.

Meanwhile, department officials will be working on one of the most important regulations of the entire health reform implementation process — the definition of “essential” health benefits. HHS is moving deliberately on the rule; stakeholders don’t expect to see a proposal until late this year. The process is beginning with an Institute of Medicine study of current industry practices. The IOM has collected hundreds of comments and has scheduled a two-day meeting on the subject for Jan. 12-14. Next comes a Labor Department study of employer plans. The reform law states that the essential benefits package should be in line with a typical employer plan, a point that insurers emphasized as they encouraged HHS and the IOM to avoid a prescriptive definition.

Stakeholders have also encouraged HHS to adopt a flexible definition of Accountable Care Organizations (ACOs) in its regulation expected later this month. The regulation is expected to answer several outstanding questions — including how payments will work and whether beneficiaries must be notified that they’ve been assigned to an ACO.

State and federal regulators will also need to move forward this year on insurance exchanges per the reform law’s mandate. HHS has said it will announce by Feb. 15 the five states that will receive grants to help develop information technology systems for the exchanges, and another round of more generalized planning grants is on tap. The National Association of Insurance Commissioners has finished its work on a model state law to set up the core functions of an exchange and is working on a series of policy papers about the thornier issues that each state will have to decide for itself — such as whether to let its exchange actively negotiate with plans, or simply certify compliance with federal standards. The exchanges won’t be up and running until 2014, but state legislatures need to work through those issues relatively soon in order to meet that deadline. HHS’ first round of guidance on the exchanges provided few details about the department’s thinking, but meetings between state and federal regulators are still under way, sources say.

Other policies that either took effect Jan. 1 or are set to take effect this year include:

Prohibiting the use of flexible savings accounts and health savings accounts for over-the-counter drugs without a doctor’s prescription.

Eliminating or reducing Medicare beneficiaries’ cost-sharing for preventive services.

Cuts in Medicare Advantage payments.

A $2 billion per year tax on the pharmaceutical industry. Controversy could still ensue over the proposed tax structure’s treatment of orphan drugs.

Listing the value of employer-provided health plans on employees’ W-2 forms.


The new Republican majority in the House plans to hold a vote next week (Jan. 12) on a bill to repeal health reform. But with Democrats still in control of the Senate and the White House, that vote will be almost purely symbolic. The GOP could, however, chip away at the law through piecemeal revisions, such as repealing the unpopular “1099” tax provision, and by cutting off funding, sources say. February traditionally marks the beginning of the budget and appropriations process, and stakeholders have said some of the health care-related recommendations from President Barack Obama’s bipartisan deficit commission could find new life either in the president’s budget request or on Capitol Hill.

Senate Democrats tried several times in the last quarter of 2010 to repeal the 1099 provision, and it will likely be an easy, early target in this year as the GOP tries to notch victories against the new law. Beyond 1099, however, the most vulnerable policies are harder to pin down. The Center for Medicare and Medicaid Innovation was seen in some corners as an attractive prospect because of its $10 billion budget, but other Republican sources suggested that the party wouldn’t want to tap into money that could ultimately lead to more significant federal savings. Lawmakers from both parties expressed concerns when voting for the Independent Payment Advisory Board, but it’s funded through the Medicare trust — one of the many ways in which the reform law made it difficult for a future Congress to dismantle the IPAB. Republicans have never liked the CLASS Act, a long-term care insurance program, but it scores savings in its first 10 years, meaning that repealing it now would require substantial offsets. Never mind that HHS hasn’t begun implementing it yet, despite a Jan. 1 deadline in the statute.

Health care was not among the major investigations announced this week by Rep. Darrel Issa (R-CA), the new chair of the House Oversight and Government Reform Committee, indicating that oversight of the new law and HHS’ implementation effort will come mostly from the Energy and Commerce Committee — whose chair, Rep. Fred Upton (R-MI), is an outspoken critic of health reform.


The next major development in the ongoing legal battle over the individual mandate will likely be a ruling from a federal court in Florida, where judge Roger Vinson heard oral arguments last month. The suit was brought by 20 state attorneys general and joined by the National Federation of Independent Business, and it has emerged as perhaps the highest-profile challenge to the coverage requirement. Vinson is a Republican appointee and reportedly seemed skeptical of the mandate during oral arguments, questioning whether the federal government could also control health care spending by requiring Americans to eat their vegetables.

Aside from Vinson’s decision on the constitutionality of the mandate, a key piece of his ruling will be whether he strikes down the entire reform law or just the coverage requirement. Reform supporters saw a bit of a silver lining when a Virginia judge let the rest of the law stand, despite the lack of a severability clause in the statute. Although many of health reform’s consumer protections — namely the requirement to cover people with pre-existing conditions — might be practically unworkable without the mandate, the prospect of keeping them legally intact gives supporters some breathing room to consider alternatives to a direct mandate.

Whatever Vinson decides, his ruling will be yet another early step in a long legal battle that most observers believe will ultimately end up before the U.S. Supreme Court. Meanwhile, the Justice Department has said it will appeal the Virginia ruling to the 4th U.S. Circuit Court of Appeals. Reform opponents who lost their case in a Michigan court are also appealing.


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