ED Physicians Can Look on the Sunny Side of ACA in 2015 with Rising ED Visits
By Edward R. Gaines III, JD, CCP, chief compliance officer, Zotec Partners
Although the controversy surrounding the Affordable Care Act (ACA)appears to be never ending (witness the King v. Burwell case pending at the US Supreme Court with an expected ruling by mid-year), the impact of the law on emergency medicine (EM) continues to be measured and studied. For example, a recent study in the Annals of Emergency Medicine by Drs. Jessica Galarraga and Jesse Pines indicated that the ACA could positively impact the bottom line of emergency departments across the country. The study analyzed emergency department charges from 2005 to 2010 and found that compared to payments received from uninsured patients, Medicaid reimbursed 17% more. Thus, under the ACA, Medicaid expansion alone would be expected to contribute significantly to increased ED revenue. In a recent Modern Healthcare article, “ER Visits Still Rising Despite ACA,” author Michael Sandler cites that, “patient emergency room visits rose sharply at hospitals with the highest ER use in 2013, but many of the hospitals with the busiest ERs in 2013 were reporting even higher volumes in 2014 despite the nation's declining uninsured rate.” For the currently uninsured who will not qualify for Medicaid through the ACA and are instead obliged to obtain coverage through a private insurer, the ED revenue improvement will be even greater, on the order of 39%. (See Galarraga and Pines).
Despite the many controversies surrounding the law, the expansion of health care coverage has been seemingly positive for hospital-based providers. There are three main elements of reform that will likely continue to benefit physician groups in 2015: Medicaid expansion, hospital volume increases, and expanding coverage with creativity.
Medicaid Expands Beyond the Poverty Level and With Simplified Income Tests:
Prior to the passage of the ACA, Medicaid required certain qualifying conditions before low income individuals could become eligible. The elimination of these qualifying conditions in the ACA for states who have expanded Medicaid is an aspect that often goes unreported in the Obamacare debate. Prior to the ACA, the patient was required to have a dependent, be disabled or blind, in addition to being at a certain poverty level. For example, a middle-aged couple with no children at 133 percent of federal poverty levels (FPL) could not qualify for Medicaid before Obamacare became law.
Why is that an issue? The problem is that 133 percent of poverty is definitely not enough to afford a commercial plan and is in fact the definition of the working poor. Qualifying for Medicaid under the ACA, in contrast, is turned into a simple income test. A middle-aged, childless couple at the 133% of FPL is still only making $21,000 a year. So, the working poor can be defined as people who are underemployed, or unemployed during periods of time when they are trying to improve their incomes.
Although some states have chosen to reject federal dollars for Medicaid expansion, those that have elected to expand their Medicaid programs have extended coverage to three key groups: working parents, non-working parents and childless adults.
Emergency physicians are well aware of the implication of expanding Medicaid. Historically, Medicaid has reimbursed physicians poorly. This is certainly true in New Jersey and New York, where emergency physicians are reimbursed at the some of the lowest rates in the country (NJ is at approximately $27 per visit). While some argue that at least care is reimbursed, others counter that the reimbursement does not even cover the costs of malpractice, and operational costs for physician staffing and billing. Some people will say that Medicaid does not pay very well, and it does not in many states. It does pay something, however. Converting zero insurance or low single digits of collections for self-pay (approximately 5-8%) into some insurance is a pickup and a definite benefit to providers.
Increased Hospital Volume
Another aspect of the ACA legislation that gets overlooked is its list of 10 essential health care benefits that payers are now required by law to provide. With the benefits comes a dilemma, because it is being argued that this provision is the reason why so many existing policies were canceled. The net positive aspect, however, is that ambulatory patient services, emergency services and hospitalization are covered. In general and with certain limited exceptions, the insurers can no longer play games with offering plan benefits that do not include these mandated benefit coverages, and that is a very good aspect of the law.
In fact, ED volume increased in states that voluntarily expanded coverage even before the passage of the ACA—namely, in Oregon (where ED volumes increased significantly) and in Massachusetts (where ED volume increases were smaller relative to OR but showed steady growth). The recent study released regarding Portland, Oregon’s newly covered Medicaid recipients showed ED volume increases at approximately 40 percent over a nearly 2 year period based on a randomized controlled study that expanded Medicaid in a lottery among previously uncovered citizens of Portland. ED volumes increased across the demographic of newly covered Medicaid recipients and across presenting conditions. In the Annals of Emergency Medicine (3/20/14), Dr. Peter Smulowitz and his colleagues studied the impact of “Romneycare” in MA and found initial and then steady increases of ED visits across the demographic of the newly insured. As coverage extends with ACA Medicaid expansion into approximately half of the states, the pent up demand for services by the working poor who were not previously covered by Medicaid, e.g. childless adults, and lack of adequate primary care networks increases ED volumes.
Medicaid Coverage Using Private Insurance as the Solution:
The ACA has inspired creative approaches to expanding Medicaid coverage. For example, Arkansas chose to use the federal dollars proffered for Medicaid expansion to buy private Medicaid health plans for its newly eligible Medicaid covered lives up to 138% of federal poverty levels (FPL). This program is known as “premium support” because it provides the federal Medicaid matching funds to pay for Medicaid policies until such time as the Medicaid recipient is able to improve their income—then the policy is covered by the healthcare exchanges at federally subsidized levels. If the recipient’s income should rise to 150 percent or more of FPL, they would no longer be eligible for traditional Medicaid and their policy would convert from a Medicaid health plan to a commercial policy that is significantly subsidized in the health exchange.
So called “Red States” may also eventually see the wisdom of a creative approach like Arkansas’—and both Iowa (approved) and Pennsylvania (approved) have their own versions of the “AR Model”. The rationale cited by some states opting out of Medicaid expansion is that they do not want to expand a broken program, but in Arkansas Medicaid patients will receive commercial policies, making it a private-market solution. The state government is using federal expansion dollars to purchase private plans for the benefit of its working poor, and that is positive news for anyone working in hospital-based medicine.
Some hospitals and health systems are now considering paying patient premiums for the newly insured accessing health insurance via the marketplace or exchanges after federal subsidies are applied for those between 100-400% of FPL. Alternatively, hospitals are also considering making contributions to charities that obtain subsidized policies for the newly insured on the health exchanges. This could be a net benefit to the hospitals to pay for the patients’ insurance, because they will potentially be utilizing hospital services if they have insurance. It is a somewhat controversial notion and could introduce legal and compliance issues, but hospitals are still considering it. It should be noted that healthcare counsel should be consulted before a hospital or group decides to proceed with such plans since these arrangements may carry implications under federal anti-kickback statutes.
Seeing the Net Positive
The long term budget and policy implications of the ACA remain to be seen. Issues of adverse selection, how plans will alter premiums over time, the impact of narrow networks for the exchange plans, the level (and legality, in light of the Burwell case) of federal subsidies and the impact of significant cost sharing (e.g., high deductable plans) on healthcare providers and individuals will remain “X Factors” in the healthcare debate. Also, recent statements by health plan officials regarding increased costs for the exchange policies are potentially concerning. Whether the “3.0 versions of the AR Model” of Medicaid expansion will be submitted to HHS for approval also remains to be seen—but increasingly more states are requesting some version of “partial” or “modified” expansion authority. In the meantime, however, there is no question that the number of uninsured patients is going to continue decreasing over time, and that is a net positive for emergency physicians in particular, and hospital based physician groups in general. The burdens to emergency physicians for uncompensated care should be reduced, with more reimbursements from private insurance and public institutions and fewer self-pay patients.
Edward R. Gaines III, JD, CCP is a chief compliance officer of Zotec Partners.