HCA Holdings 2011 Annual Report Download - page 31

limits the availability of certain IRS enforcement mechanisms. In addition, for individuals and families below
400% of the FPL, the cost of obtaining health insurance through the Exchanges will be subsidized by the federal
government. Those with lower incomes will be eligible to receive greater subsidies. It is anticipated that those at
the lowest income levels will have the majority of their premiums subsidized by the federal government, in some
cases in excess of 95% of the premium amount.
To facilitate the purchase of health insurance by individuals and small employers, each state must establish an
Exchange by January 1, 2014. Based on CBO estimates issued in March 2011, approximately 24 million individuals
will obtain their health insurance coverage through an Exchange by 2021. This amount will include individuals who
were previously uninsured and individuals who have switched from their prior insurance coverage to a plan
obtained through the Exchange. The Health Reform Law requires that the Exchanges be designed to make the
process of evaluating, comparing and acquiring coverage simple for consumers. For example, each state’s Exchange
must maintain an internet website through which consumers may access health plan ratings that are assigned by the
state based on quality and price, view governmental health program eligibility requirements and calculate the actual
cost of health coverage. Health insurers participating in an Exchange must offer a set of minimum benefits to be
defined by HHS and may offer more benefits. Health insurers must offer at least two, and up to five, levels of plans
that vary by the percentage of medical expenses that must be paid by the enrollee. These levels are referred to as
platinum, gold, silver, bronze and catastrophic plans, with gold and silver being the two mandatory levels of plans.
Each level of plan must require the enrollee to share the following percentages of medical expenses up to the
deductible/copayment limit: platinum, 10%; gold, 20%; silver, 30%; bronze, 40%; and catastrophic, 100%. Health
insurers may establish varying deductible/copayment levels, up to the statutory maximum (estimated to be between
$6,000 and $7,000 for an individual). The health insurers must cover 100% of the amount of medical expenses in
excess of the deductible/copayment limit. For example, an individual making 100% to 200% of the FPL will have
copayments and deductibles reduced to about one-third of the amount payable by those with the same plan with
incomes at or above 400% of the FPL.
Public Program Spending
The Health Reform Law provides for Medicare, Medicaid and other federal health care program spending
reductions between 2010 and 2019. In March 2010, CMS estimated Medicare fee-for-service reductions from
2010 to 2019 would be $233 billion and the Medicare and Medicaid DSH reductions would be an additional $64
billion. In February 2011, the CBO estimated that from 2012 to 2021, the Health Reform Law reductions would
include $379 billion in Medicare fee-for-service market basket and productivity reimbursement reductions, the
majority of which will come from hospitals. The CBO estimate included an additional $57 billion in reductions
in Medicare and Medicaid DSH funding.
Payments for Hospitals and Ambulatory Surgery Centers
Inpatient Market Basket and Productivity Adjustment. Under the Medicare program, hospitals receive
reimbursement under a PPS for general, acute care hospital inpatient services. CMS establishes fixed PPS
payment amounts per inpatient discharge based on the patient’s assigned MS-DRG. These MS-DRG rates are
updated each federal fiscal year, which begins October 1, using a market basket index that takes into account
inflation experienced by hospitals and other entities outside the health care industry in purchasing goods and
services.
The Health Reform Law provides for three types of annual reductions in the market basket. The first is a
general reduction of a specified percentage each federal fiscal year starting in 2010 and extending through 2019.
These reductions are as follows: federal fiscal year 2010, 0.25% for discharges occurring on or after April 1,
2010; 2011 (0.25%); 2012 (0.1%); 2013 (0.1%); 2014 (0.3%); 2015 (0.2%); 2016 (0.2%); 2017 (0.75%); 2018
(0.75%); and 2019 (0.75%).
The second type of reduction to the market basket is a “productivity adjustment” that was implemented by
HHS beginning in federal fiscal year 2012. The amount of that reduction is the projected nationwide productivity
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