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Supreme Court Applies Health Insurance Tax Credits Nationwide

Gavel(July 1, 2015) By a 6 to 3 decision, on June 25th the U.S. Supreme Court interpreted the Affordable Care Act (ACA) to provide health insurance tax credits to individuals in States with Federal insurance Exchanges.  The law will thus apply uniformly throughout the country, although 16 States and the District of Columbia have established their own Exchanges and the remaining 34 States have elected to have the Federal government create an Exchange for them.   The controversy centered on the section 18031 of the ACA, providing that the amount of the health insurance tax credit depends in part on whether the individual has enrolled in an insurance plan through “an Exchange established by the State under section 1311.”

The lawsuit originated with several Americans who wanted to lose their tax credits so that their health insurance would exceed eight percent of their income, in which case they would be exempt from the ACA’s mandatory insurance coverage.  They argued that because the Federal government had created the Exchange in their State, they were not enrolled in an Exchange “established by the State under section 1311.”  The ACA created a Federal healthcare system with several mandates in addition to compulsory insurance coverage:

1) insurers must offer coverage to all individuals in the State (“guaranteed issue”);

2) insurers may not vary premiums according to health (“community rating”); and

3) the Federal government must provide tax credits to individuals with household incomes between 100 and 400 percent of the Federal poverty line.

According to Chief Justice Roberts, who wrote the majority opinion:  “Congress found that the guaranteed issue and community rating requirements would not work without the coverage requirement…And the coverage requirement would not work without the tax credits.  The reason is, without the tax credits, the cost of buying insurance would exceed eight percent of income for a large number of individuals, which would exempt them from the coverage requirement.”  Chief Justice Roberts noted that absent mandatory insurance coverage, individuals wait until they become sick to buy insurance.  As a result, insurers must raise premiums and many leave the market.  This is known as the “death spiral,” which may be avoided only by legislating all the pieces of the healthcare puzzle.

In essence, the majority of justices said that Congress could not have intended to withhold health insurance tax credits from States with Exchanges created by the Federal government.   First, the phrase at issue is ambiguous, in part because other sections of the ACA assume that tax credits will be available on both State and Federal Exchanges.  For example, section 18031(i)(3)(B) requires all Exchanges to distribute “fair and impartial information concerning…the availability of premium tax credits…”  Second, a reading of the ACA as a whole militates against the reading urged by the petitioners because “it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very ‘death spirals’ that Congress designed the Act to avoid.”  In 2014, approximately 87 percent of people who bought insurance on a Federal Exchange did so with health insurance tax credits, and virtually all would become exempt from mandatory insurance coverage without the tax credits, according to a government report.

In his dissent, Justice Scalia argued that the phrase at issue is unambiguous and that Congress could have intended to incentivize States to establish their own Exchanges.  He stated:  “Words no longer have meaning if an Exchange that is not established by a State is “established by the State.’”  Moreover, the ACA uses the phrase “an Exchange established by the State” on seven different occasions, but sometimes refers to Exchanges without the qualifying language.  As such, according to Justice Scalia, Congress “probably means something by the contrast.”

Gloria Frank_051815_0016-2Gloria Frank, Esq. is a health law attorney with the firm, Liles Parker, Attorneys & Counselors at Law.  Liles Parker has offices in Washington DC, Houston TX, McAllen TX and Baton Rouge LA.  Our attorneys represent health care professionals around the country in connection with government audits of Medicaid and Medicare claims, licensure matters and transactional projects.  Need assistance?  For a free consultation, please call: 1 (800) 475-1906.

The 2015 Mid-Year OIG Work Plan Has Been Released

Medical-Insurance-Audit(June 1, 2015):  As set out in the 2015 mid-year OIG Work Plan, the agency has once again announced its intentions to report on numerous types of potential fraud, waste, and abuse in HHS programs, as well as on the economy, efficiency, and effectiveness of the programs. The OIG plans to produce 193 reports in the near future, 65% of which will pertain to Medicare and Medicaid.

The OIG will study an array of provider and supplier types, including those that most often attract OIG scrutiny, such as home health agencies (HHAs), hospitals, and durable medical equipment companies. Although the OIG likes to revisit topics and measure progress in fraud, waste, and abuse prevention, it has announced the following new topics:

  • Intensity-modulated radiation therapy (IMRT) is an advanced mode of high-precision radiotherapy that uses computer-controlled linear accelerators. The OIG will review hospital outpatient payments for IMRT.

  • Hospital preparedness. The OIG will evaluate hospitals’ preparedness for public health emergencies resulting from infectious diseases, such as Ebola.

  • Access in competitive bid areas. There are anecdotal reports that competitive bidding within the Medicare program for some durable medical equipment (DME), prosthetics, orthotics, and supplies has curtailed access by beneficiaries. The OIG will study whether this proposition is true.

  • Clinical diagnostic laboratory tests. In anticipation of new Medicare payment rates for clinical diagnostic laboratory tests in 2017, as mandated by the Protecting Access to Medicare Act of 2014, the OIG will analyze payments for such tests in 2014. It will look at the top 25 tests according to expenditure.

  • IRF Issues. The OIG will report whether inpatient rehabilitation facilities (IRFs) have complied with the parameters of the IRF Prospective Payment System. In addition, the OIG will review whether documentation by IRFs has been compliant.

  • ACO use of EHR. Accountable care organizations (ACOs) promote accountability of hospitals, physicians, and other providers for patients, coordinate care, and encourage investment in infrastructure and redesigned care processes. The OIG will review the extent to which providers participating in ACOs use electronic health records (EHR) and will identify best practices and challenges to interoperability (the extent to which information systems can exchange data and interpret the shared data).

  • Overview of Part D. The OIG will summarize previous audits, legal opinions, and investigative work on the Medicare Part D program for drugs. It also will provide recommendations to improve oversight by the Centers for Medicare & Medicaid Services (CMS), Plan Sponsors, and the Medicare anti-fraud contractor.

  • Opioid trends. Opioid diversion and abuse and Part D fraud are perceived to be growing problems. In its upcoming report, the OIG will describe trends in billing for opioids and other drugs from 2006 to 2014, including trends associated with pharmacies.

  • Drug rebates. The Federal Government receives a share of drug rebates under Medicaid. The Affordable Care Act (ACA) increased rebates for Medicaid outpatient drugs.  The OIG will examine whether the States have been correctly reporting rebates.

  • T-MSIS. The Transformed Medicaid Statistical Information System (T-MSIS) is a repository of data about Medicaid and the Children’s Health Insurance Program to assist CMS in various areas, including program integrity. The OIG will determine whether the States report properly to the T-MSIS.

In addition to the above new topics, as discussed in the 2015 mid-year OIG Work Plan, the agency plans to study numerous other ways in which providers and suppliers may provide substandard care or receive payments to which they are not entitled. For example, it will examine hospice billing for general inpatient care. With respect to a DME item of great concern to the OIG—power mobility devices (PMDs)—the OIG will determine whether CMS can save money if Medicare beneficiaries rent certain PMDs over 13 months, rather than purchase them. Also, the OIG will continue to review payment rates for ambulatory surgical centers (ASCs).  One question is whether there is a disparity between ASC rates and those for hospital outpatient departments performing the same services.

Many of the studies pertain to Medicaid. For example, the 2015 mid-year OIG Work Plan notes that the OIG will be reviewing dental services under the Early and Periodic Screening, Diagnostic, and Treatment benefit for children.  As the Work Plan notes:  “In recent years, a number of dental providers and chains have been prosecuted for providing unnecessary dental procedures and causing harm to Medicaid children.  In addition, children’s access to dental services has been a longstanding Medicaid problem.” Also, States must terminate Medicaid providers who have been terminated by Medicare or by other State Medicaid programs. States must suspend a Medicaid provider if there are credible allegations of fraud against that provider. The OIG will review whether the States have followed these directives.

In addition to its stewardship over all HHS programs, the OIG will review key areas of ACA implementation, including emerging marketplace issues, Medicaid expansion and services, Medicare payment and delivery reform, program integrity, and public health program reform. The OIG will further look at HHS funds under the American Recovery and Reinvestment Act of 2009. In particular, it will review HHS’ award of incentive payments to providers for meaningful use of EHR. Some hospitals, including critical access hospitals, will be audited to determine whether they have conducted a security risk analysis of their EHR.

Gloria Frank_051815_0016-2Gloria Frank, Esq. is a health law attorney with the firm, Liles Parker, Attorneys & Counselors at Law.  Liles Parker has offices in Washington DC, Houston TX, McAllen TX and Baton Rouge LA.  Our attorneys represent health care professionals around the country in connection with government audits of Medicaid and Medicare claims, licensure matters and transactional projects.  Need assistance?  For a free consultation, please call: 1 (800) 475-1906.

The full OIG work plan may be located at http://oig.hhs.gov/reports-and-publications/archives/workplan/2015/WP-Update-2015.pdf.