Washington Update to the NASMHPD and NASDDDS Legal Divisions

1. Washington Update to the NASMHPD and NASDDDS Legal Divisions Justin C Harding, JD NASMHPD Senior Policy Associate

2. Recent DSH Rules • Allotments for FY 2012 (final) and FY 2013 (preliminary) were made on July 26th. (see 78 Fed Reg. 45217.) • DSH and forensic patients. In January, CMS issued a rule which substantially changes how psychiatric facilities can calculate DSH related costs. The rule specifically excludes from all DSH calculations: • Individuals who are inmates in a public institution or are otherwise involuntarily in secure custody as a result of criminal charges are considered to have a source of third party coverage. (See 77 Fed. Reg. 2500.)

3. DSH Final Rule for Cuts Final rule for DSH reductionsissued by HHS on September 13th. The rule only covers 2014 and 2015, after which the rule will be revisited by HHS. The rule is designed on the proposed rule discussed last month. That rule was designed to minimize DSH cuts and to hold states harmless as they weigh Medicaid expansion and the ACA in general.

4. DSH Fiscal Year Alignment • New interim final DSH rule, which aligns payments with each individual hospital’s cost reporting periods. The rule was effective immediately, with the comments period extending to November 29th. The rule would lessen administrative burden for many hospitals.

5. DSH Investigations Methodology • Eligible hospital: For the New Jersey enforcement, OAS argued that the NJ hospitals did not meet the MIUR calculations. MIUR represents Medicaid inpatient utilization rate. • Conditions of participation: For the other three states, OAS argued that the hospitals did not meet the required standards for hospitals. While DSH is Medicaid based, psychiatric hospitals are required to meet basic and special Medicare standards. Those standards are satisfied either via participation in Medicare or via inspections/accreditation.

6. DSH Investigations • Conducted by the HHS Office of Audit Services • Totals: in the last 12 months, 4 states, 8 hospitals, and over $90 million in DSH funds returned. In prior years maybe 1 investigation a year. • States Affected: New Jersey (Nov. 2012); Oklahoma (March 2013); Indiana (May 2013); Missouri (June 2013)

7. Big Picture Issues • Federal efforts re outpatient commitment • Block Grant • Privacy concerns • Peers

8. Outpatient Commitment • Representative Murphy bill • New York Times article

9. Block Grant • Joint mental health and substance abuse application still inching towards full implementation • Data efforts • Funding levels • Pressure from Congress and OMB

10. Privacy Concerns • Healthcare exchanges • New efforts

11. Peers • 31 States and DC currently bill Medicaid • Georgia – only state billing for whole health • Pillars of Peer Support • Nothing regarding background checks – still state level only

12. Arkansas and Iowa model for Medicaid Expansion • CMS Issued guidance on implementation of state purchased premiums. That guidance is available here and here. • Details of the Arkansas plan. • Details of the Iowa plan. • Side-by-side comparison of key provisions

13. Income Verification and Insurance Subsidies • CMS had previously announced, in a Final Rule released July 5th, that the honor system would be used. • CMS clarified their position on August 5th. They also issued a FAQ. Elements include: • The honor system only applies to state exchanges IN SOME INSTANCES; federal exchanges will be fully verified. • The honor system will only apply in 2014, the first year of the state exchanges. • During both the federal and state application processes, the interim tax credit or cost-sharing reductions will last 90 days - by which time a determination should be finalized.

14. Income Verification and Insurance Subsidies - Cont • The federal verification process will use IRS and Social Security Administration data; if that is insufficient employer data and credit agency data will be used; and the final step would be applicant provided data. • State income verification will be identical, except that the honor system will apply only in certain conditions such when IRS data exists from a prior year and the applicant explains that at least a 10% income reduction has occurred. • Overall, this means that real time income verification will not exist, but that verification will likely occur quickly within the 90 day period (such as faxing a pay stub facilitating a speedy determination).

15. ACA Rules Update • Employer mandate proposed rule. This largely effects information reported by certain employers to the IRS. It applies even though the mandate has been delayed by a year (until 2015). Participation is voluntary in the short term. • Individual Mandate Final Rule. This rule covers shared responsibility payments, penalties, and rules for when consumers must have insurance. • Marketplace Program Integrity Final Rule. Fact Sheet also available. The rule sets standards establishing marketplaces and insurers while preserving state role. • IRS Proposed Rule Regarding Minimum Essential Coverage Reporting. • Renewal of IRS comment gathering on patient protection. The comment request largely directed at an ACA patient protection notice, but does cover the rule regarding pre-existing conditions. • Department of Labor guidance regarding coverage. • Delay of final agreements with exchange plans. Not expected to delay marketplace opening.

16. Rules During Shutdown • Many rules delayed – including a number of significant IRS/Treasury regulations. • Basic Health program rule. The proposed rule describes eligibility and enrollments standards for people with incomes between 133 and 200% of poverty and who do not qualify for Medicaid or CHIP. These individuals would purchase plans in the exchanges with 95% federal (via premium tax credits or cost-sharing reductions) payments. Benefits would include the 10 essential health benefits.

17. Policy “Glitches” • Delay of SHOP exchanges for one month. • Family glitch. Applies to employer provided plans. The ACA defines affordable as 9.5% or less of an employee’s income, but this calculation omits family plans – which frequently cost much more - $5,600 to $15,700 according to Kaiser. As a result up to 500,000 kids could be without insurance if employers choose to only provide insurance to the employee. This is a drafting error which will likely need a Congressional fix. • Bipartisan group of 100 House members asked CMS for 6 month delay in regulatory provision defining when a Medicare beneficiary is classified as inpatient or outpatient. Potential for higher out of pocket costs for consumers. Rule does affect some psychiatric services.

18. Trends in Insurance purchasing • Catastrophic plan purchasers – catastrophic plans must soon be upgraded to standard plans • Cadillac plan insurance purchasers – Employer paid Cadillac plans will be increasingly taxed • Family plans paid for by small businesses • Delay until 2015 in limits on consumer deductibles.

19. Health Insurance Trends • Hospital mergers have doubled since introduction of ACA. • ACO’s are increasingly being formed. • Slowest rate of inflation of health benefit plan costs in 14 years • Federal Marketplaces will offer an average of 53 plans, with lower premiums than projected. • Physicians unhappy with current electronic health records.

20. Insurance Trends • Some large insurers – including AETNA, Cigna and Unitedhealthcare, are limiting their participation or pulling out of exchanges • Some employers – Kroger, UPS and the University of Virginia for example – are ending some types of spousal participation in their health plans. Current projections have the percentage of such employers rising from 4% to 12%. • Some business (IBM and Time Warner for example) are shifting retirees and part-timers to the exchanges.

21. Organized Labor • Unions still concerned about the effects of the ACA on so called “Cadillac Plans”. • Many unions have expressed a significant amount of misgivings about the effects of the ACA on multi-employer plans. • While a small number of unions have urged ACA repeal, most unions (such as the AFL-CIO) are urging the Obama Administration to extend subsidies to union members. • Unions are concerned that absent those subsidies smaller employers within the multi-employer plans will leave those union negotiated plans and force union members (potentially millions of members) to seek insurance on the exchanges.

22. Traditionally Underserved Populations • Immigrants. A significant number of legal immigrants will face difficult decisions regarding the ACA. For example, some will be required to purchase insurance on the exchanges but, despite their poverty, be ineligible for subsidies or Medicaid. • Native-Americans. Native-Americans are particularly hard hit by sequester and other budget cuts, but ACA provides opportunity to provide care to 579,000 uninsured Native-Americans. Fact Sheet for more information.

23. Notable Events and Issues • House Small Business Committee panel hearing on October 9th. • US Chamber of Commerce Survey – 74% of small businesses intend to take some type of action to avoid the employer mandate • Raymond Keating, chief economist at the Small Business and Entrepreneurship Council in said that two-third of the nation’s job gains between January and August were part time jobs, a dramatic change from the norm. • Dean Baker, co-director for the Center for Economic and Policy Research, testified it was unclear what effect the ACA has had, if any. Arguing that the penalty per employer is $2,000, and that the penalty does not include anything for the first 30 workers of a business. He also cited to Hawaii, which has had a similar employer mandate since the early 1980s, where there have been miniscule changes in employment rates. • GAO Report on CMS Oversight role in Limited Benefit Plans.

24. Senate Finance Committee Letters • NASMHPD’s is available on the NASMHPD website. • Also of note is the National Association of Medicaid Directors letter.

25. Crime and Punishment

26. Medicare Hospital Readmissions Program • Program started last year, punishing 2,217 hospitals and over 280 million in Medicare Funds • Last week, an additional 2,225 hospitals were cited for over $227 million • While hospitals dedicated to psychiatry, rehabilitation, long –term care and veterans are omitted, poverty and conditions such as obesity are frequently key factors that many affected hospitals have noted are the underlying cause for readmissions. Commentators have also noted that safety net hospitals are those being hit the hardest by these penalties. For more information, please visit this CMS webpage. • In positive news, Medicare announced August 1st that payments to inpatient psychiatric facilities would increase 2.3% - $115 million total (see 78 Fed. Reg. 46,733).

27. Antitrust Warnings • Recent Speech by FTC Commissioner Julie Brill. • Future oversight and Commissioner Brill warning both based on traditional antitrust laws, such as the Sherman Antitrust Act, as well as recent rulemaking.

28. Antitrust Test • State Action Doctrine. Parker v Brown. 317 US 341 (1943) • 1. “The state has clearly articulated a policy to displace competition. This requires that the policy both justifies the anticompetitive behavior and sufficiently expresses that such behavior is both expected and endorsed.” • 2. The state has committed to active supervision of activities by health care payers; simple authorization or regulation of proceedings is not sufficient. The state must be able to review potential anticompetitive acts such as setting prices and rates among payers.

29. Litigation and Enforcement • OMB - $450 million in deficit savings missed due to lack of enforcement. • State decision-making regarding termination of contracts with providers accused of Medicaid fraud. • Managed care plans increasingly facing litigation. • San Francisco sues Nevada regarding patient “dumping”.

30. Program Integrity Update Recent meeting with various federal partners

31. Parity Regulations • Where are they? 5 years of waiting finally over. • Recent Senate Judiciary Oversight Subcommittee on Oversight, Federal Rights, and Agency Action regarding impact of delays

32. Parity Summary • Were formally published today, November 13th. http://www.gpo.gov/fdsys/pkg/FR-2013-11-13/html/2013-27086.htm. • Regulations were previously viewable on SAMHSA website or public inspection desk of Federal Register. • Promulgated under the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).

33. Continuity from final rule • Rules retain the six categories originally announced in the interim rule: inpatient, in-network; inpatient, out-of-network; outpatient, in-network; outpatient, out-of-network; emergency care; and prescription drugs. • Most other parts of the interim rule also remain – the new final rule adds wrinkles based on comments, FAQs, and the implementation of the Affordable Care. While the final rule applies to benefit plan years beginning on or after July 1, 2014, MHPAEA began affecting health plans in 2010. The interim rules took effect in July 2010. • The ACA, in some areas, significantly extends the reach of MHPAEA, but parity also affects numerous other Acts such as the Public Health Service Act, ERISA and the Internal Revenue Code. • The regulations were issued jointly by the Department of Labor, the Department of the Treasury, and the Department of Health and Human Services.

34. Big picture • While MHPAEA deals with employer insurance when the employer has 50+ employees, parity has been functionally extended very broadly through the ACA, particularly through essential health benefits rules (see 78 FR 12834; Feb 25, 2013). • Cannot have separate cumulative financial requirements and cumulative quantitative treatment limits. Example – annual of lifetime deductibles. The Departments rejected the idea that separate deductibles was burdensome, and noted that many plans, including prior state efforts, noted no ill effects.

35. Major tests General Parity Analysis A group health plan (or health insurance coverage offered by an issuer in connection with a group health plan) that provides both medical/surgical benefits and mental health or substance use disorder benefits may not apply any financial requirement or treatment limitation to mental health or substance use disorder benefits in any classification that is more restrictive than the predominant financial requirement or treatment limitation of that type applied to substantially all medical/surgical benefits in the same classification. Whether a financial requirement or treatment limitation is a predominant financial requirement or treatment limitation that applies to substantially all medical/surgical benefits in a classification is determined separately for each type of financial requirement or treatment limitation. • Substantially all - two-thirds • Predominant – more than half NQTLs – or nonquantitative treatment limitations. Within the 6 categories, is the NQTL comparable to, and are analysis factors applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in applying the limitation with respect to medical/surgical benefits in the same classification… • Examples of NQTLs include medical management techniques, such as prior authorization, formulary design for prescription drugs, standards for provider admission, and provider reimbursement rates Finally, If a plan provides MH or SA disorder benefits in any classification of benefits, MH or SA benefits must be provided in every classification in which med/surg benefits are provided.

36. NQTL Examples • Example 5. (i) Facts. A plan generally covers medically appropriate treatments. In • determining whether prescription drugs are medically appropriate, the plan automatically excludes coverage for antidepressant drugs that are given a black box warning label by the Food and Drug Administration (indicating the drug carries a significant risk of serious adverse effects). For other drugs with a black box warning (including those prescribed for other mental health conditions and substance use disorders, as well as for medical/surgical conditions), the plan will provide coverage if the prescribing physician obtains authorization from the plan that the drug is medically appropriate for the individual, based on clinically appropriate standards of care. • (ii) Conclusion. In this Example 5, the plan violates the rules of this paragraph (c)(4). • Although the standard for applying a nonquantitative treatment limitation is the same for both mental health and substance use disorder benefits and medical/surgical benefits – whether a drug has a black box warning – it is not applied in a comparable manner. The plan’s unconditional exclusion of antidepressant drugs given a black box warning is not comparable to the conditional exclusion for other drugs with a black box warning.

37. NQTL Examples • Example 6. (i) Facts. An employer maintains both a major medical plan and an employee assistance program (EAP). The EAP provides, among other benefits, a limited number of mental health or substance use disorder counseling sessions. Participants are eligible for mental health or substance use disorder benefits under the major medical plan only after exhausting the counseling sessions provided by the EAP. No similar exhaustion requirement applies with respect to medical/surgical benefits provided under the major medical plan. • (ii) Conclusion. In this Example 6, limiting eligibility for mental health and substance use disorder benefits only after EAP benefits are exhausted is a nonquantitative treatment limitation subject to the parity requirements of this paragraph (c). Because no comparable requirement applies to medical/surgical benefits, the requirement may not be applied to mental health or substance use disorder benefits.

38. NQTL Examples • Example 9. (i) Facts. A plan generally covers medically appropriate treatments. The plan automatically excludes coverage for inpatient substance use disorder treatment in any setting outside of a hospital (such as a freestanding or residential treatment center). For inpatient treatment outside of a hospital for other conditions (including freestanding or residential treatment centers prescribed for mental health conditions, as well as for medical/surgical conditions), the plan will provide coverage if the prescribing physician obtains authorization from the plan that the inpatient treatment is medically appropriate for the individual, based on clinically appropriate standards of care. • (ii) Conclusion. In this Example 9, the plan violates the rules of this paragraph (c)(4). Although the same nonquantitative treatment limitation – medical appropriateness – is applied to both mental health and substance use disorder benefits and medical/surgical benefits, the plan’s unconditional exclusion of substance use disorder treatment in any setting outside of a hospital is not comparable to the conditional exclusion of inpatient treatment outside of a hospital for other conditions.

39. Regulatory Notes • The Departments rejected a request to base the definitions of MH and SA on solely state law – a combination of state and federal will be used. • Plans which have copays for office visits and coinsurance for all other outpatient services are acceptable. • Plans still may not split between generalists and specialists for parity purposes. • Newer health plan structures which have tiers (such as preferred in-network) are permissible so long as the tiering is based on reasonable factors without regard to med/surg, MH or SA. • Departments rejected pairing specific pairings for parity – e.g. physical rehab with SA disorder rehab. • Parity analysis need not be done annually unless there has been a change within the plan regarding benefit design, cost-sharing structure, or utilization affecting financial requirements or treatment limitations. • Clinically recognized standard of care exception for NQTLs from the interim rule was deleted – too confusing. • The criteria for medically necessary determinations must be made available by the plan to any current or potential participant, beneficiary or contracting provider upon request.

40. Regulatory Notes • The Departments declined to specifically address specific NQTLs (such as prior authorization), instead stating that all NQTLs should follow the same rules. • The specific scope of services is not defined. The Departments did not intend to mandate, or exclude, certain levels of care. The Departments prefer to defer to States to define the package of benefits for essential health benefits. For example, intermediate benefits would be examined within the six categories just as all other benefits. • Traditionally the rule has used 50+ employees to determine applicability, but the preamble has a long discussion about different laws using 50 or 100. • In February 2013 HHS published a final essential health benefit regulation that requires all non-grandfathered plans in the individual and group markets to cover all EHBs, including MA and SA. No more end-runs to avoid? Moreover, this EHB requirement applies to employers smaller than 50 employees. • Cost exemption still exists, but no employer has used it in the three years of the MHPAEA. When determining costs, a plan or issuer must rely on actual claims or encounter data. There are provisions detailing administrative costs for these calculations. • Plans cannot put MH/SA in one plan, and med/surg in a different plan. The plans will be combined for analysis for parity compliance. And combining is necessary to prevent evasion. Coverage as a whole must be compliant. • Coverage for specific conditions is not mandated - the provision of benefits for one mental health condition does not require the provision for other conditions or disorders.

41. Regulatory Notes • The same NQTLs do not need to be used for MH/SA vs med/surg, only that the processes, strategies, evidentiary standards and other factors to determine whether a benefit is subject to an NQTL are comparable and applied no more stringently. Disparate results alone do not mean that the NQTL in use is inappropriate. • Example 2. (i) Facts. A plan applies concurrent review to inpatient care where there are high levels of variation in length of stay (as measured by a coefficient of variation exceeding 0.8). In practice, the application of this standard affects 60 percent of mental health conditions and substance use disorders, but only 30 percent of medical/surgical conditions. • (ii) Conclusion. In this Example 2, the plan complies with the rules of this paragraph (c)(4) because the evidentiary standard used by the plan is applied no more stringently for mental health and substance use disorder benefits than for medical/surgical benefits, even though it results in an overall difference in the application of concurrent review for mental health conditions or substance use disorders than for medical/surgical conditions.

42. Regulatory Notes • Self-funded plans are not specifically covered by MHPAEA. • Retiree only plans (2 active employees max) are also still exempted. • Employee assistance programs ARE covered, and are subject to NQTL analysis. • Medicaid and CHIP are not covered, and are still governed by the January 2013 CMS letter (See http://www.medicaid.gov/Federal-Policy-Guidance/downloads/SHO-13-001.pdf. These ARE still covered by MHPAEA, just not by this final rule. CMS claims that it will be providing additional guidance. • The prior understanding about federal law superseding state law remains unchanged. Narrowest preemption is intended. • States have primary enforcement authority over health insurance issuers. CMS currently believes that most states have authority to enforce MHPAEA. It is not clear who the lead state agency is. • Multiple studies have shown that plans and states have been implementing all portions of MHPAEA and that there have been little to no demonstrated negatives in terms of costs or employers dropping MH/SA benefits. For example, nearly all plans had eliminated separate deductibles by 2011. • MHPAEA has caused coverage changes for approximately 103 million people in 420,700 ERISA plans, and 29.5 million people in 23,000 public, non-federal plans. The ACA extends MHPAEA to 11 million people in the individual market. Other secondary benefits may be decreased bankruptcies (10% of medical bankruptcies are for MH costs, with another 2-3% from SA), a possible decrease in SSDI entrants, increased workplace productivity (from decreasing the workplace effects of depression, estimated to cause $31-$51 billion annually).

43. Unclear • When does state have primary enforcement? • When do these parity regulations apply, and when do other regulations apply (Medicaid, CHIP, Medicare, EHBs, etc….)? • Need more clarity regarding the January 2013 CMS letter regarding Medicaid and CHIP. • How do state definitions and federal definitions co-exist? • What is role of SMHA? Subject matter expert?

44. Other resources Numerous FAQs, which are added on a continuous basis. These include: • FAQ About Mental Health Parity and Addiction Equity Act, available at http://www.dol.gov/ebsa/faqs/faq-mhpaea.html • See FAQs about Affordable Care Act Implementation (Part V)and Mental Health Parity Implementation, available at http://www.dol.gov/ebsa/faqs/faq-aca5.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html • FAQs about Affordable Care Act Implementation (Part VII) and Mental Health Parity Implementation, available at http://www.dol.gov/ebsa/faqs/faq-aca7.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs7.html#Mental Health Parity and Addiction Equity Act of 2008 • FAQs about Affordable Care Act Implementation (Part V) and Mental Health Parity Implementation, questions 8-11, available at http://www.dol.gov/ebsa/faqs/faq-aca5.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html • FAQs about Affordable Care Act Implementation (Part VII) and Mental Health Parity Implementation, questions 2-6, available at http://www.dol.gov/ebsa/faqs/faq-aca7.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs7.html#Mental Health Parity and Addiction Equity Act of 2008 • FAQs about Affordable Care Act Implementation (Part VII) and Mental Health Parity Implementation, question 7, available at http://www.dol.gov/ebsa/faqs/faq-aca7.html and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs7.html#Mental Health Parity and Addiction Equity Act of 2008 • FAQ issued concurrently with final rule: http://www.dol.gov/ebsa/healthreform/ and http://www.cms.gov/cciio/Resources/Fact-Sheets-and-FAQs/index.html. ASPE Study. “Analyses presented in this report show that employers and health plans have made substantial changes to their plan designs in order to meet the standards set out by MHPAEA and the IFR. By 2011, ERISA-governed group health plans and health insurance offered in connection with group health plans seem to have removed most financial requirements that did not meet MHPAEA standards. Nearly all had eliminated the use of separate deductibles for MH/SUD treatment and medical/surgical treatment, although few were in use prior to the MHPAEA IFR. The number of plans that apply unequal inpatient day limits, outpatient visit limits or other QTLs for MH/SUD has dropped substantially, though a minority persist with limited, unequal MH/SUD benefits.” http://aspe.hhs.gov/daltcp/reports/2013/mhpaeAct.shtml.

45. How to Reach Us • Justin C Harding • Senior Policy Associate • NASMHPD • 703-682-5182 • Justin.Harding@NASMHPD.org