MEDICARE NEWS

DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Services
Room 352-G
200 Independence Avenue, SW
Washington, DC 20201
Office of Media Affairs

MEDICARE NEWS

FOR IMMEDIATE RELEASE                                     Contact: CMS Office of Media Affairs

August 19, 2011                                                                                              (202) 690-6145

MEDICARE TO SAVE TAXPAYERS AND BENEFICIARIES $28 BILLION WITH AN EXPANDED COMPETITIVE BIDDING PROGRAM

Program to Purchase Durable Medical Equipment beginning second phase

The Centers for Medicare & Medicaid Services (CMS) today announced the next steps for a major expansion of a competitive bidding program that helps lower costs for quality durable medical equipment, prosthetics, orthotics, and supplies. 

“Today, we’re taking steps that will save Medicare, seniors, and taxpayers $28 billion over 10 years,” said CMS Administration Donald M. Berwick, M.D. “Medicare is paying much more than the private sector for equipment like wheelchairs and walkers. By expanding our successful competitive bidding program, we can ensure that Medicare pays a fair rate for these goods.”.”

The competitive bidding program uses competitions between suppliers to set new, lower payment rates for certain medical equipment and supplies, such as oxygen equipment, walkers, and some types of power wheelchairs.  The first phase of the program was successfully implemented for nine product categories in nine areas of the country on January 1, 2011.

To date, Round One of competitive bidding has yielded savings of 35% compared to the fee schedule, 51% of contracts awarded to small businesses, and no changes in beneficiary health status.  Inquiries in the first quarter of 2011 totaled less than 0.9 percent of calls to the Medicare call center, and Medicare received only 45 complaints during that time.

As required by law, CMS will conduct the second phase of the program for a similar set of products in 91 major metropolitan areas. Competition begins this fall, and the new prices will be in effect on July 1, 2013.

From a beneficiary standpoint, there will be no immediate effect in areas where the program is expanding. These beneficiaries may continue to use their current suppliers at this time. Similar to the successful implementation of Round 1 of the program, CMS will conduct extensive outreach to beneficiaries in the Round 2 areas prior to the new program taking effect.

 “The success we’ve had in the first phase tells us that we can achieve these savings with no disruption for patients’ access and  no negative effect on patients’ health,” said Jonathan Blum, Deputy CMS Administrator and Director of the Center for Medicare. “We remain confident in our bidding methodologies that will produce tangible savings while ensuring adequate choice of qualified suppliers.”

The expanded Round Two categories of products are:

·        Oxygen, oxygen equipment, and supplies;

·        Standard (Power and Manual) wheelchairs, scooters, and related accessories (a new category that combines all mobility devices);

·        Enteral nutrients, equipment, and supplies;

·        Continuous Positive Airway Pressure (CPAP) devices and Respiratory Assist Devices (RADs) and related supplies and accessories;

·        Hospital beds and related accessories;

·        Walkers and related accessories;

·        Negative Pressure Wound Therapy pumps and related supplies and accessories (new category);

·        Support surfaces (Group 2 mattresses and overlays).

CMS will now begin a pre-bidding supplier awareness program for Round Two, and conduct a national mail order competition for diabetic testing supplies at the same time as the Round Two competition.  A list of ZIP codes included in Round Two and a list of the specific items in each product category are available on the website for the Competitive Bidding Implementation Contractor, www.dmecompetitivebid.com.  

Additional information on the competitive bidding program is available at: http://www.cms.hhs.gov/DMEPOSCompetitiveBid/01_overview.asp#TopOfPage

# # #

MEDICARE FACT SHEET

FOR IMMEDIATE RELEASE                                     Contact: CMS Office of Media Affairs

Friday, August 19, 2011                                                    (202) 690-6145

NEXT STEPS FOR EXPANSION OF THE MEDICARE DURABLE MEDICAL EQUIPMENT, PROSTHETICS, ORTHOTICS, AND SUPPLIES  

COMPETITIVE BIDDING PROGRAM

  

Overview

The Centers for Medicare & Medicaid Services (CMS) today announced plans to expand the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program.  This program is an essential tool to help Medicare set appropriate payment rates for DMEPOS items and services.  Except in nine areas of the country where the program is now in effect for certain items, Medicare pays for DMEPOS items using a fee schedule that is generally based on historic supplier charges from the 1980s, increased by an annual covered item update factor.  Numerous studies from the Department of Health and Human Services Office of Inspector General and the Government Accountability Office have shown that the fee schedule amounts for certain DMEPOS items are excessive; taxpayers and Medicare beneficiaries bear the burden of these excessive payments.  

The DMEPOS Competitive Bidding Program replaces the existing outdated, excessive fee schedule amounts with market-based prices. Under the program, DMEPOS suppliers compete to become Medicare contract suppliers by submitting bids to furnish certain items in competitive bidding areas (CBAs).  The new, lower payment amounts resulting from the competition replace the fee schedule amounts for the bid items in these areas.  The payment amounts from the supplier competition for the Round One Rebid of the program result in average savings of 35 percent as compared to the current fee schedule prices.  These new payment amounts went into effect on January 1, 2011, in nine CBAs, and data being monitored by CMS have shown a successful implementation with very few complaints and no changes in beneficiary health status resulting from the program. The expansion being announced today broadens the program to an additional 91 areas of the country, adds additional high cost, high volume items with a large savings potential to the list of the product categories subject to bid, and also announces a national mail order competition for diabetic testing supplies.

The overall savings to Medicare and beneficiaries as a result of the DMEPOS competitive bidding program is expected to total more than $28 billion over the first ten years of the program, according to the CMS Office of the Actuary. The $28 billion savings comes from a combination of savings of more than $17 billion in Medicare expenditures, and savings of over $11 billion for beneficiaries as a result of lower coinsurance payments and the downward effect on monthly premium payments.

Background

The Medicare DMEPOS Competitive Bidding Program was established by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“Medicare Modernization Act” or “MMA”) after the conclusion of successful demonstration projects.  The demonstration projects, which were conducted in Polk County, Florida, and San Antonio, Texas, resulted in an average 20 percent savings for Medicare with unchanged access and satisfaction for Medicare beneficiaries and quality of DMEPOS items and services.   

Under the MMA, the DMEPOS Competitive Bidding Program was to be phased in so that competition under the program would first occur in 10 areas in 2007.  As required by law, CMS conducted the Round One competition in 10 areas and for 10 DMEPOS product categories, and successfully implemented the program on July 1, 2008, for two weeks before the contracts were terminated by subsequent law.  Round One resulted in a projected average savings of 26 percent compared to Medicare’s fee schedule, which would have been substantial savings for Medicare beneficiaries and taxpayers.

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) temporarily delayed the program in 2008, terminated the Round One contracts that were in effect, and made other limited changes.  As required by MIPPA, CMS conducted the supplier competition again in 2009, referring to it as the Round One Rebid.  The Round One Rebid contracts and prices became effective on January 1, 2011.  CMS deployed a wide range of resources to monitor the program, including beneficiary surveys, active claims surveillance and analysis, contract supplier reporting, and tracking and analysis of complaints and inquiries.  To date, monitoring data have shown a successful implementation with very few complaints and no changes in beneficiary health status resulting from the program.  Health outcomes data are available on the CMS website at: www.cms.gov/DMEPOSCompetitiveBid/

MIPPA requires the competition for Round Two to occur in 2011 in 70 additional metropolitan statistical areas (MSAs), and authorizes national mail order competitions after 2010.  The Affordable Care Act of 2010 (ACA) expands the number of Round Two MSAs from 70 to 91 and mandates all areas of the country are subject either to DMEPOS competitive bidding or payment rate adjustments using competitively bid rates by 2016.

To date, Round One of competitive bidding has yielded savings of 35% compared to the fee schedule, 51% of contracts awarded to small businesses, and no changes in beneficiary health status.  Inquiries in the first quarter of 2011 totaled less than 0.9 percent of calls to the Medicare call center, and Medicare received only 45 complaints during that time.

PROGRAM EXPANSION

The Round One Rebid includes nine product categories of items.  In Round Two, CMS is expanding the list of items bid in the Round One Rebid by combining standard manual wheelchairs, standard power wheelchairs, and scooters to form a new expanded standard mobility device product category, expanding bidding for support surfaces throughout all Round Two areas and adding negative pressure wound therapy pumps and related supplies and accessories as an additional product category.  All of the product categories selected for Round Two are high cost, high volume items with a large savings potential.  Group 2 complex rehabilitative power wheelchairs, which were bid in the Round One Rebid, will not be included in Round Two as we evaluate the suitability of this product category under the program.

The Round Two product categories are:

·        Oxygen, oxygen equipment, and  supplies

·        Standard (Power and Manual) wheelchairs, scooters, and related accessories

·        Enteral nutrients, equipment, and supplies

·        Continuous Positive Airway Pressure (CPAP) devices and Respiratory Assist Devices (RADs) and related supplies and accessories

·        Hospital beds and related accessories

·        Walkers and related accessories

·        Negative Pressure Wound Therapy pumps and related supplies and accessories

·        Support surfaces (Group 2 mattresses and overlays)

  

CMS will also be conducting a national mail order competition for diabetic testing supplies at the same time as the Round Two competition.  The national mail order competition will include all parts of the United States, including the 50 States, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa.

A list of the specific items in each product category is available on the Competitive Bidding Implementation Contractor (CBIC) website, www.dmecompetitivebid.com

As required by MIPPA and ACA, CMS will be conducting the Round Two competition in 91 MSAs.  Most Round Two MSAs will have only one CBA.  However, the three largest MSAs (New York, Los Angeles, and Chicago) will each be subdivided into multiple CBAs, so there will be a total of 100 CBAs.  A list of the Round Two MSAs is available on the CMS website at www.cms.gov/DMEPOSCompetitiveBid/ .  A list of the specific ZIP codes in each CBA is available on the CBIC website, www.dmecompetitivebid.com .

NEXT STEPS FOR THE DMEPOS COMPETITIVE BIDDING PROGRAM

To ensure that suppliers have ample time to prepare, CMS has announced the following next steps for the program:

  

•      Summer 2011

–     CMS begins pre-bidding supplier awareness program

•      Fall 2011

–     CMS announces bidding schedule

–     CMS begins bidder education program

–     Bidder registration period to obtain user ID and passwords begins

•      Winter 2012

–     Bidding Begins

Suppliers wishing to bid in Round Two or the National Mail Order Competition should now begin to get ready for the competition, which will begin with registration this fall.  All potential bidders, including suppliers that bid in the Round One Rebid, will need to register for user IDs and passwords so that they will be able to submit bids.  As in the Round 1 Rebid program, suppliers must meet all applicable eligibility, financial, quality, and accreditation standards in order to be awarded a contract.   

Suppliers interested in bidding must ensure that certain key information in their enrollment files at the National Supplier Clearinghouse (NSC) is up-to-date and that they obtain all required state licenses for the items, and in the areas, for which they wish to bid.  Any required licenses not already on file with the NSC should be submitted right away.  

Suppliers that are interested in bidding on items they do not currently offer should act now to become accredited for those items.  Suppliers must be accredited for all items in a product category to bid for that product category.  Further information on the DMEPOS accreditation requirements may be found at the CMS Web site at:  http://www.cms.hhs.gov/MedicareProviderSupEnroll/01_Overview.asp.

ADDITIONAL INFORMATION

For additional information about the Medicare DMEPOS Competitive Bidding Program, please visit:  http://www.cms.hhs.gov/DMEPOSCompetitiveBid/

MEDICARE NEWS

DEPARTMENT OF HEALTH & HUMAN SERVICES
Centers for Medicare & Medicaid Services
Room 352-G
200 Independence Avenue, SW
Washington, DC 20201
Office of Media Affairs

MEDICARE NEWS

FOR IMMEDIATE RELEASE                                     Contact: CMS Office of Media Affairs

August 19, 2011                                                                                              (202) 690-6145

MEDICARE TO SAVE TAXPAYERS AND BENEFICIARIES $28 BILLION WITH AN EXPANDED COMPETITIVE BIDDING PROGRAM

Program to Purchase Durable Medical Equipment beginning second phase

The Centers for Medicare & Medicaid Services (CMS) today announced the next steps for a major expansion of a competitive bidding program that helps lower costs for quality durable medical equipment, prosthetics, orthotics, and supplies. 

“Today, we’re taking steps that will save Medicare, seniors, and taxpayers $28 billion over 10 years,” said CMS Administration Donald M. Berwick, M.D. “Medicare is paying much more than the private sector for equipment like wheelchairs and walkers. By expanding our successful competitive bidding program, we can ensure that Medicare pays a fair rate for these goods.”.”

The competitive bidding program uses competitions between suppliers to set new, lower payment rates for certain medical equipment and supplies, such as oxygen equipment, walkers, and some types of power wheelchairs.  The first phase of the program was successfully implemented for nine product categories in nine areas of the country on January 1, 2011.

To date, Round One of competitive bidding has yielded savings of 35% compared to the fee schedule, 51% of contracts awarded to small businesses, and no changes in beneficiary health status.  Inquiries in the first quarter of 2011 totaled less than 0.9 percent of calls to the Medicare call center, and Medicare received only 45 complaints during that time.

As required by law, CMS will conduct the second phase of the program for a similar set of products in 91 major metropolitan areas. Competition begins this fall, and the new prices will be in effect on July 1, 2013.

From a beneficiary standpoint, there will be no immediate effect in areas where the program is expanding. These beneficiaries may continue to use their current suppliers at this time. Similar to the successful implementation of Round 1 of the program, CMS will conduct extensive outreach to beneficiaries in the Round 2 areas prior to the new program taking effect.

 “The success we’ve had in the first phase tells us that we can achieve these savings with no disruption for patients’ access and  no negative effect on patients’ health,” said Jonathan Blum, Deputy CMS Administrator and Director of the Center for Medicare. “We remain confident in our bidding methodologies that will produce tangible savings while ensuring adequate choice of qualified suppliers.”

The expanded Round Two categories of products are:

·        Oxygen, oxygen equipment, and supplies;

·        Standard (Power and Manual) wheelchairs, scooters, and related accessories (a new category that combines all mobility devices);

·        Enteral nutrients, equipment, and supplies;

·        Continuous Positive Airway Pressure (CPAP) devices and Respiratory Assist Devices (RADs) and related supplies and accessories;

·        Hospital beds and related accessories;

·        Walkers and related accessories;

·        Negative Pressure Wound Therapy pumps and related supplies and accessories (new category);

·        Support surfaces (Group 2 mattresses and overlays).

CMS will now begin a pre-bidding supplier awareness program for Round Two, and conduct a national mail order competition for diabetic testing supplies at the same time as the Round Two competition.  A list of ZIP codes included in Round Two and a list of the specific items in each product category are available on the website for the Competitive Bidding Implementation Contractor, www.dmecompetitivebid.com.  

Additional information on the competitive bidding program is available at: http://www.cms.hhs.gov/DMEPOSCompetitiveBid/01_overview.asp#TopOfPage

# # #

MEDICARE FACT SHEET

FOR IMMEDIATE RELEASE                                     Contact: CMS Office of Media Affairs

Friday, August 19, 2011                                                    (202) 690-6145

NEXT STEPS FOR EXPANSION OF THE MEDICARE DURABLE MEDICAL EQUIPMENT, PROSTHETICS, ORTHOTICS, AND SUPPLIES  

COMPETITIVE BIDDING PROGRAM

  

Overview

The Centers for Medicare & Medicaid Services (CMS) today announced plans to expand the Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program.  This program is an essential tool to help Medicare set appropriate payment rates for DMEPOS items and services.  Except in nine areas of the country where the program is now in effect for certain items, Medicare pays for DMEPOS items using a fee schedule that is generally based on historic supplier charges from the 1980s, increased by an annual covered item update factor.  Numerous studies from the Department of Health and Human Services Office of Inspector General and the Government Accountability Office have shown that the fee schedule amounts for certain DMEPOS items are excessive; taxpayers and Medicare beneficiaries bear the burden of these excessive payments.  

The DMEPOS Competitive Bidding Program replaces the existing outdated, excessive fee schedule amounts with market-based prices. Under the program, DMEPOS suppliers compete to become Medicare contract suppliers by submitting bids to furnish certain items in competitive bidding areas (CBAs).  The new, lower payment amounts resulting from the competition replace the fee schedule amounts for the bid items in these areas.  The payment amounts from the supplier competition for the Round One Rebid of the program result in average savings of 35 percent as compared to the current fee schedule prices.  These new payment amounts went into effect on January 1, 2011, in nine CBAs, and data being monitored by CMS have shown a successful implementation with very few complaints and no changes in beneficiary health status resulting from the program. The expansion being announced today broadens the program to an additional 91 areas of the country, adds additional high cost, high volume items with a large savings potential to the list of the product categories subject to bid, and also announces a national mail order competition for diabetic testing supplies.

The overall savings to Medicare and beneficiaries as a result of the DMEPOS competitive bidding program is expected to total more than $28 billion over the first ten years of the program, according to the CMS Office of the Actuary. The $28 billion savings comes from a combination of savings of more than $17 billion in Medicare expenditures, and savings of over $11 billion for beneficiaries as a result of lower coinsurance payments and the downward effect on monthly premium payments.

Background

The Medicare DMEPOS Competitive Bidding Program was established by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“Medicare Modernization Act” or “MMA”) after the conclusion of successful demonstration projects.  The demonstration projects, which were conducted in Polk County, Florida, and San Antonio, Texas, resulted in an average 20 percent savings for Medicare with unchanged access and satisfaction for Medicare beneficiaries and quality of DMEPOS items and services.   

Under the MMA, the DMEPOS Competitive Bidding Program was to be phased in so that competition under the program would first occur in 10 areas in 2007.  As required by law, CMS conducted the Round One competition in 10 areas and for 10 DMEPOS product categories, and successfully implemented the program on July 1, 2008, for two weeks before the contracts were terminated by subsequent law.  Round One resulted in a projected average savings of 26 percent compared to Medicare’s fee schedule, which would have been substantial savings for Medicare beneficiaries and taxpayers.

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) temporarily delayed the program in 2008, terminated the Round One contracts that were in effect, and made other limited changes.  As required by MIPPA, CMS conducted the supplier competition again in 2009, referring to it as the Round One Rebid.  The Round One Rebid contracts and prices became effective on January 1, 2011.  CMS deployed a wide range of resources to monitor the program, including beneficiary surveys, active claims surveillance and analysis, contract supplier reporting, and tracking and analysis of complaints and inquiries.  To date, monitoring data have shown a successful implementation with very few complaints and no changes in beneficiary health status resulting from the program.  Health outcomes data are available on the CMS website at: www.cms.gov/DMEPOSCompetitiveBid/

MIPPA requires the competition for Round Two to occur in 2011 in 70 additional metropolitan statistical areas (MSAs), and authorizes national mail order competitions after 2010.  The Affordable Care Act of 2010 (ACA) expands the number of Round Two MSAs from 70 to 91 and mandates all areas of the country are subject either to DMEPOS competitive bidding or payment rate adjustments using competitively bid rates by 2016.

To date, Round One of competitive bidding has yielded savings of 35% compared to the fee schedule, 51% of contracts awarded to small businesses, and no changes in beneficiary health status.  Inquiries in the first quarter of 2011 totaled less than 0.9 percent of calls to the Medicare call center, and Medicare received only 45 complaints during that time.

PROGRAM EXPANSION

The Round One Rebid includes nine product categories of items.  In Round Two, CMS is expanding the list of items bid in the Round One Rebid by combining standard manual wheelchairs, standard power wheelchairs, and scooters to form a new expanded standard mobility device product category, expanding bidding for support surfaces throughout all Round Two areas and adding negative pressure wound therapy pumps and related supplies and accessories as an additional product category.  All of the product categories selected for Round Two are high cost, high volume items with a large savings potential.  Group 2 complex rehabilitative power wheelchairs, which were bid in the Round One Rebid, will not be included in Round Two as we evaluate the suitability of this product category under the program.

The Round Two product categories are:

·        Oxygen, oxygen equipment, and  supplies

·        Standard (Power and Manual) wheelchairs, scooters, and related accessories

·        Enteral nutrients, equipment, and supplies

·        Continuous Positive Airway Pressure (CPAP) devices and Respiratory Assist Devices (RADs) and related supplies and accessories

·        Hospital beds and related accessories

·        Walkers and related accessories

·        Negative Pressure Wound Therapy pumps and related supplies and accessories

·        Support surfaces (Group 2 mattresses and overlays)

  

CMS will also be conducting a national mail order competition for diabetic testing supplies at the same time as the Round Two competition.  The national mail order competition will include all parts of the United States, including the 50 States, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and American Samoa.

A list of the specific items in each product category is available on the Competitive Bidding Implementation Contractor (CBIC) website, www.dmecompetitivebid.com

As required by MIPPA and ACA, CMS will be conducting the Round Two competition in 91 MSAs.  Most Round Two MSAs will have only one CBA.  However, the three largest MSAs (New York, Los Angeles, and Chicago) will each be subdivided into multiple CBAs, so there will be a total of 100 CBAs.  A list of the Round Two MSAs is available on the CMS website at www.cms.gov/DMEPOSCompetitiveBid/ .  A list of the specific ZIP codes in each CBA is available on the CBIC website, www.dmecompetitivebid.com .

NEXT STEPS FOR THE DMEPOS COMPETITIVE BIDDING PROGRAM

To ensure that suppliers have ample time to prepare, CMS has announced the following next steps for the program:

  

•      Summer 2011

–     CMS begins pre-bidding supplier awareness program

•      Fall 2011

–     CMS announces bidding schedule

–     CMS begins bidder education program

–     Bidder registration period to obtain user ID and passwords begins

•      Winter 2012

–     Bidding Begins

Suppliers wishing to bid in Round Two or the National Mail Order Competition should now begin to get ready for the competition, which will begin with registration this fall.  All potential bidders, including suppliers that bid in the Round One Rebid, will need to register for user IDs and passwords so that they will be able to submit bids.  As in the Round 1 Rebid program, suppliers must meet all applicable eligibility, financial, quality, and accreditation standards in order to be awarded a contract.   

Suppliers interested in bidding must ensure that certain key information in their enrollment files at the National Supplier Clearinghouse (NSC) is up-to-date and that they obtain all required state licenses for the items, and in the areas, for which they wish to bid.  Any required licenses not already on file with the NSC should be submitted right away.  

Suppliers that are interested in bidding on items they do not currently offer should act now to become accredited for those items.  Suppliers must be accredited for all items in a product category to bid for that product category.  Further information on the DMEPOS accreditation requirements may be found at the CMS Web site at:  http://www.cms.hhs.gov/MedicareProviderSupEnroll/01_Overview.asp.

ADDITIONAL INFORMATION

For additional information about the Medicare DMEPOS Competitive Bidding Program, please visit:  http://www.cms.hhs.gov/DMEPOSCompetitiveBid/

The Truth about the Affordable Care Act and Medicare

Published by hCentive on 16 Aug in Healthcare Reforms, Healthcare Technology Blog

The Patient Protection and Affordable Care Act (PPACA) was passed amidst a lot of fanfare on one hand and a lot of fear and dismay on the other. The folks from the latter half feared, amongst other things, that these new health reforms would take away or reduce their Medicare benefits. However, if one examines the Act, you will find that to be far from the truth.

Let’s address 2 critical issues that have been worrying a lot of people.

1. The reforms will adversely affect my prescription drug coverage
Incorrect. The reforms will positively impact the beneficiaries of the Medicare prescription drug plan or the Medicare Advantage plan who hit the coverage gap. In 2011, when the beneficiaries hit the dreaded ‘donut hole’, they are eligible for discounts of about 50% on brand name drugs and about 7% on generic drugs. As a matter of fact, these discounts will keep increasing until the coverage gap is closed in 2020.

2. The reforms mean the demise of the Medicare Advantage program
On the contrary, Medicare Advantage plans have and will remain strong. Since the passage of the Affordable Care Act, Medicare Advantage plans have shown a growth of 5% in enrolment from 2010 to 2011.

The Internet is alive with discussions about the Reforms and its implications on a number of healthcare services that are a part of most Americans’ lives. Here, Tom Paul, CEO of United Healthcare is quoted as saying ‘Medicare Advantage plans have a track record of providing comprehensive, cost-effective health coverage, helping more than 11.5 million beneficiaries save money and access services not covered by Original Medicare.’

The PPACA at its core intends to provide each and every American – rich, poor, young and old with affordable healthcare. Insurance companies and the states will both have to come together to provide a marketplace that will educate and provide all Americans with affordable and all-encompassing healthcare solutions.

10th Circuit Rules on FDIC Protection of Annuity Accounts

·         By ARTHUR D. POSTAL

Published 8/18/2011 

Two life insurance company subsidiaries of Aviva USA should recover only 16% of the $11.3 million they deposited in a Topeka, Kan., bank that failed in 2008, according to a 3-judge panel of the 10th U.S. Circuit Court of Appeals.

The life companies – Aviva Life & Annuity Company and American Investors Life Insurance Company – had deposited most of the funds in the bank, Columbian Bank & Trust Company, Topeka -- in two large accounts.

Aviva USA, Des Moines, Iowa, has argued in the case, Aviva vs. FDIC, No. 10-3163, that the life companies created the accounts for a large number of annuity holders, and that each annuity contract holder should get the FDIC protection accorded an annuity contract holder.

The FDIC determined that the deposits were held in two corporate accounts and had only $200,000 in FDIC insurance protection. A judge at the U.S. District Court for the District of Kansas upheld found that the FDIC had not acted arbitrarily or capriciously in determining that, “because the two challenged accounts were each entitled ‘operating account,’ they were to be aggregated as corporate accounts, up to the deposit limit of $100,000,” Judge Michael Murphy writes in an opinion for the 10th Circuit panel.

The 10th Circuit panel sustained the lower-court ruling.

If the court had upheld Aviva USA’s claim, the life companies would have received $8.6 million in FDIC insurance payments up front and 12.287% of the proceeds from the sale of the bank’s assets.

Columbian, a bank that held $622 million in total deposits, including $268 million in brokered deposits, was closed and its deposits sold to a Chillicothe, Mo., bank Aug. 22, 2008.

According to the FDIC, outside of the brokered deposits, Columbian held only $46 million in 610 accounts that exceeded the insurance limits, apparently $11.3 million in Aviva uninsured accounts, according to the court ruling.

Aviva USA is a unit of Aviva P.L.C., London (NYSE:AV).

Kevin Waetke, a spokesman for Aviva USA, says Aviva does not intend to pursue the matter further.

"The court's decision was limited to a narrow issue of administrative law regarding the FDIC's authority," Waetke says. "It is important to note that this issue occurred three years ago and the decision has no impact on our current operations. Aviva does not intend to pursue the matter any further.”

Section 330.8

The two corporate accounts involved in the suit included an account for Aviva Life & Annuity that held $4,242,854.60 and an account for American Investors Life that held $7,098,344.56.

The appeals court decision notes that several smaller accounts containing from $1,000 to $10,000 were deemed by the FDIC to be held for the benefit of annuity customers. Those accounts were accorded pass-through treatment, meaning that each account was insured up to the $100,000 deposit insurance limit in effect at that time.

In exercising its prerogative under FDIC regulations, “the FDIC determined these deposit accounts records clearly and unambiguously indicated that the challenged accounts were corporate accounts, and refused to consider plaintiff’s evidence to the contrary,” Judge Michael Murphy writes in an opinion for the 10th Circuit panel.

As a result, the Aviva life subsidiaries received only the $100,000 insured deposit limit for each deposit account. It received another $300,000 after the deposit accounts received total deposit insurance of $250,000 each retroactively under a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

The Aviva life subsidiaries also received $1,363,857 in two steps in 2009 as a bank creditor based on sale of Columbian’s assets.

The company's aggregate loss, after taking into account the additional $300,000 paid retroactively under the Dodd-Frank Act, was $9,436,143.

“Because the bank’s records unambiguously show that plaintiffs’ operating accounts were owned as general corporate accounts (and do not disclose that the operating accounts were owned as annuity contract accounts), the district court correctly decided that the Bank’s records were conclusive and that “FDIC was mandated, by regulation, to ‘consider no other records on the manner in which the funds are owned,” the FDIC says in a brief filed with the appellate court.

In its brief, the FDIC acknowledges that Section 330.8 of its regulations “exempts accounts of a life insurance or annuity corporation from aggregation with other accounts of that corporation (providing instead separate, 'pass-through' coverage up to $100,000 per annuitant) if five specific requirements are met: The account is a 'separate account'; the account is for the 'sole purpose' of funding life insurance and annuity contracts and incidental benefits; and three criteria under state law are met, including that the separate account is not chargeable with liabilities arising from other business of the corporation and is protected from the corporation’s creditors. The Section 330.8 exception is unavailable here because Plaintiffs do not satisfy either the threshold evidentiary requirement imposed by Section 330.5 nor the additional substantive requirements imposed by Section 330.8.”

Aviva says in its brief that, the “FDIC initially determined, and conveyed to Appellants, that the deposit accounts would be afforded pass-through treatment because the accounts were maintained for and on behalf of Appellants’ annuity customers to fund annuity contracts and the benefits incidental to such contracts.”

Subsequently, however, the brief continued, “the FDIC reversed course and erroneously denied Appellants’ claims for pass-through coverage, and classified as uninsured certain of appellants’ deposit accounts, based solely on how the accounts were labeled, despite the fact that the FDIC’s own review showed that the funds in those accounts were annuity monies.

Falling into Medicare Doughnut Hole Ups Nonadherence

Poor Uninsureds’ Health Not So Excellent

 

By NU ONLINE NEWS SERVICE

Published 8/16/2011 

 

Low-income people without health insurance are much less likely than low-income Medicaid enrollees to say they are in excellent health.  
Avalere Health L.L.C., Washington, a health policy firm, has included that finding in a discussion of the effects that the Patient Protection and Affordable Care Act of 2011 (PPACA) may have on Medicaid and other public health programs in 2014.

If PPACA takes effect on schedule and works as supporters hope, it should lead to dramatic growth in Medicaid enrollment in 2014, when PPACA coverage expansion provisions start to apply.

Conventional health policy wisdom holds that uninsured people tend to need more medical care than otherwise similar people who have health coverage.

Avalere analysts tested that belief by comparing responses to the 2008 Medical Expenditure Panel Survey from low-income people with Medicaid and low-income people without Medicaid.

About 61% of the Medicaid enrollees reported being in excellent or very good health; 51% of the low-income uninsured participants reported being in excellent or very good health.

The percentage of low-income survey participants who reported being in poor health was the same for the Medicaid enrollee group and the uninsured group: 4.3%.

The percentage of uninsured survey participants who reported being in very good healthy was higher for the uninsured survey participants: 28% of the uninsured participants said they were in very good health,
compared with 27% of the Medicaid enrollees.

But 34% of the Medicaid enrollees said they were in excellent enrollees, and just 24% said they were merely in good health; only 24% of the uninsured low-income participants said they were in excellent health, and 30% said they were merely in good health.

- Allison Bell

Quote of the Day

“If the higher trend [in Medicare Advantage enrollment] in July continues, then I think that would be a decent sign that you’re starting to see the number of seniors that are aging into the program increase….Next year is supposed to be the first year with a significant increase because of baby boomers, so that would certainly contribute to a bigger increase in 2012 than we saw this year.”
— Carl McDonald, securities analyst with Citigroup Global Markets, told AIS’s Medicare Advantage News.