Stimulus Legislation Will Affect Medicare Advantage and Medicaid Health Plans With More Funding for IT, but Tough New Privacy Rules

Medicare Advantage

Stimulus Legislation Will Affect Medicare Advantage and Medicaid Health Plans With More Funding for IT, but Tough New Privacy Rules

Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and analysis on the Medicare (and Medicaid) managed care programs.

By Judy Packer-Tursman, Editor (tursman@comcast.net)

President Obama signed into law Feb. 17 a $787 billion economic stimulus bill that could funnel significant funding to promote health information technology (IT) efforts among certain Medicare Advantage (MA) plans' networks of physicians and hospitals. The massive law also has administrative implications for MA plans because of strengthened health care privacy requirements, experts say, and, by adding $90 billion in federal Medicaid matching funds to states, is likely to have a significant positive impact on Medicaid managed care plans.

Chicago-based attorney Jack Rovner, partner and co-chair of the health law practice group at Neal, Gerber & Eisenberg LLP, says MA plans ought to view this as an opportunity to offer subsidies to augment federal incentives for physicians and hospitals in their networks to adopt electronic health records (EHRs) that meet new certification standards. He said the law will affect staff-model HMOs or group-model HMOs, including those in the MA program, that meet the law's criteria to receive incentive payments.

The American Recovery and Reinvestment Act of 2009 (H.R. 1), which includes $575 billion in spending and $212 billion in tax cuts, also strengthens health information privacy rules under HIPAA. This, too, will have "a substantial impact" on MA plans, Rovner says. He explains that the new law significantly beefs up security and compliance obligations on covered entities including MA and Part D plans and extends these obligations to their business associates. "It's going to require revisions of business-associate agreements within the year," he says, including MA plans' agreements with downstream entities such as pharmacy benefit managers (PBMs).

The law also will impose a federal data-breach notification requirement for covered entities and their business associates. Rovner explains that if there is a breach in the security of protected health information, paper as well as electronic, the plan now must notify every affected individual. "That would suggest that a prudent health-care organization, [an] MA plan, ought to digitize all their protected health information and encrypt it," he says.

The stimulus package includes $1.1 billion for comparative effectiveness research (CER). House and Senate conferees, in reaching a compromise, said the funding will be used to evaluate and compare the clinical outcomes, effectiveness, risk and benefits of medical treatments and services for particular medical conditions. They said they didn't intend the CER funding to be used to mandate coverage, reimbursement or other policies for any public or private payer.

The America's Health Insurance Plans (AHIP) trade group stated Feb. 13 that the new law, by strengthening the health care "safety net" system, investing in health information technology and conducting CER, is shaping the "essential building blocks for comprehensive health care reform."

The massive stimulus law also adds about $2 billion for community health centers, many of which work with Medicaid managed care plans and MA Special Needs Plans for people dually eligible for Medicare and Medicaid. Of this new funding, $1.5 billion would go toward construction, renovation and equipment, and the acquisition of health IT systems. The remaining $500 million would go toward grants for new sites and service areas, to increase services at existing sites and to provide supplemental payments to assist community health centers in handling spikes in the uninsured population.

"I would say the Medicaid health plans that we represent are happy that there's a new infusion of dollars into Medicaid. That's just a very positive step," says Jennifer Babcock, director of policy for the Association for Community Affiliated Plans (ACAP). "For starters, it will stave off cuts to the Medicaid program generally that probably would have impacted plans through rate cuts. It still could happen, but new FMAP [i.e., Federal Medical Assistance Percentage] dollars suggest such provider and plan cuts are less likely."

Babcock notes that the stimulus law provides a 6.2% increase in FMAP funding, compared with a 3% increase in 2003. As for the $2.5 billion in funding to community health centers, she says, "All of our plans contract with community health centers to serve their Medicaid population. The fact that the capacity of these centers is going to be bolstered is very good news for us."

"I think it will benefit the plans in ensuring access for their enrollees," she adds.

Stephen Wood, senior vice president at Ingenix Consulting, tells MAN that his firm has been asked to assist a number of community health centers in developing an IT strategy.