A Down-payment on Health Reform: The American Recovery and Reinvestment Act of 2009

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On February 17, 2009, less than a month after his inauguration, President Obama signed into law a $787 billion economic recovery package that includes over $100 billion in new health care investments. Although the law, the American Recovery and Reinvestment Act (Public Law No. 111-5) failed to gain the bipartisan support that the administration had sought, three Republican Senators played a significant role in shaping the legislation, cutting $100 billion from the package on the Senate floor (including several health care measures) and influencing the final compromise with the House.

The law’s health care provisions not only respond to the current recession, but also comprise an early down-payment on health reform by Congress and the Obama Administration. The law includes a $19.2 billion investment in health information technology, $86.6 billion in Medicaid relief for states, insurance options for the newly uninsured, financing support for health-related capital projects, and funding for biomedical research. A detailed chart outlining the law’s key health care provisions can be found here.

Health Information Technology (HIT). Expanding the use of HIT is viewed as a long-term yet essential building block of health care reform, one that is designed both to help rein in spiraling health care costs and to improve the quality of care. The law includes carrots and sticks to prod health care providers to invest in HIT, addresses concerns with interoperability of HIT systems, and adds controversial new privacy standards for individuals’ health information. Key elements of the HIT provisions include:
- State Grants for Investment in HIT architecture ($2 billion), providing loans to a broad array of health care providers and funds to integrate HIT into clinical education.
- Medicare and Medicaid incentive payments to physicians, hospitals and clinics ($17.2 billion). These payments could result in substantial funds for providers shown to be “meaningful electronic health record (EHR) users.” Beginning in 2015, the bill will cut payments to providers who fail to embrace EHR.
- Privacy and Enforcement. The law makes significant changes to existing HIPAA privacy and security standards. Among the most significant are a new mandatory notification provision in the case of a breach of unsecured protected data, and the extension of HIPAA privacy rules to business associates of covered entities, who will be subject to the same civil and criminal penalties as covered entities for security requirement violations. The law also places restrictions on marketing and fundraising communications and permits states’ attorneys general to enforce federal privacy standards.
- EHR Interoperability Standards. The law codifies the Office of the National Coordinator for Health Information Technology and requires the Office to develop HIT interoperability standards by the end of 2009.
Medicaid Funding to States. The law significantly raises the federal share of Medicaid funding so that states can maintain their current Medicaid eligibility standards while absorbing continuing increases in their Medicaid rolls caused by the recession.
- Federal Matching Assistance Percentage (FMAP) Increases. The law provides roughly $86.6 billion in new FMAP funding, split between a 6.2% across-the-board increase to all states and additional bonus distributions based on each state’s unemployment percentage. To claim these FMAP increases, states may not restrict their Medicaid eligibility standards, and they must comply with requirements to pay providers promptly, including new prompt pay requirements that benefit hospitals and nursing homes.
- Temporary increases in federal funding for Medicaid Disproportionate Share Hospital payments ($500 million). The law increases federal DSH allotments by 2.5% in each of 2009 and 2010.
Health Insurance for the Unemployed. The law provides a 65% COBRA premium subsidy for up to 9 months for employees who lose their health insurance coverage due to an involuntary termination of employment through December 31, 2009 and who elect to continue that coverage under COBRA ($24.7 billion). The law also extends the Medicaid transitional medical assistance (TMA) program through December 31, 2010, and expands eligibility for the program ($1.3 billion).
Community Health Centers. The law provides $1.5 billion for renovation and construction of community health centers (CHCs) and to enable CHCs to acquire HIT systems. The law also provides $500 million in new operating funds for CHCs.
Capital Support. The law generally expands the marketability of tax-exempt bonds, including to commercial banks, which could be of particular assistance to certain hospitals ($3.8 billion).
Research Funding. The National Institutes of Health is set to receive $8.2 billion for scientific research, $500 million for federal facilities renovations, and $1.3 billion for non-federal research facility renovations.
Comparative Effectiveness Research. The law includes $1.1 billion for research into the comparative effectiveness of covered treatments. While the law removed an earlier Senate amendment to limit the research results to clinical applications, the conference report states that comparative effectiveness research is not intended “to be used to mandate coverage, reimbursement, or other policies for any public or private payor.”
Prevention and Workforce Funding. The law provides $1 billion for prevention and wellness programs. It also provides $500 million to address health care workforce shortages.
Blocking Bush Administration Regulations. The law extends Congressional moratoria on three controversial final Medicaid regulations (relating to provider taxes, school-based administration and transportation costs, and targeted case management) through June 30, 2009, and blocks an additional Medicaid regulation related to hospital outpatient services. The law also reverses the phase-out of the Medicare hospital Indirect Medical Education (IME) adjustment factor for capital payments for 2009, blocks a Medicare payment cut to hospice providers, and makes technical corrections to long term care hospital Medicare payment provisions. Finally, lawmakers included a "Sense of the Congress" resolution that the Administration should not finalize three proposed Medicaid regulations relating to intergovernmental transfers, graduate medical education, and rehabilitative services.