Michigan Health Law Link : Michigan Health Care Lawyer & Attorney : Smith Haughey Rice & Roegge Law Firm : Ann Arbor, Grand Rapids, Traverse City

The Obama administration reported that in 2011, the first full year of the new healthcare reform law, 3.6 million people in the Medicare program saved $2.1 billion on prescription drugs. According to Kathleen Sebelius, the Secretary of Health and Human Services, eventually healthcare reform will close the Medicare donut hole completely.

The "donut hole" is the informal name for the Medicare Part D coverage gap. When a Medicare beneficiary has a Part D prescription plan, the beneficiary is responsible for paying an initial deductible. Then, the beneficiary enters the initial coverage phase, where the beneficiary is responsible for paying a co-payment on all prescriptions while their insurance pays the remaining balance. After a Medicare beneficiary surpasses the prescription drug coverage limit for the year, however, the Medicare beneficiary is financially responsible for the entire cost of prescription drugs until the expense reaches the catastrophic coverage threshold. Then, insurance will again cover the primary cost of the prescriptions until the end of the year. This "gap" when the beneficiary must cover the entire cost of prescriptions is known as the "donut hole". These costs can be extremely burdensome on Medicare beneficiaries, which is why the Affordable Care Act's ("ACA") provisions that lower such costs are so appealing to beneficiaries.

According to the Detroit News, the savings on prescription drugs created by healthcare reform had a substantial impact on Michigan Medicare beneficiaries in 2011. More than 84,000 Michigan residents receiving Medicare benefits saved nearly $49 million on prescriptions in 2011. This amounted to an average savings of $582 on prescriptions for each Michigan Medicare beneficiary who hit the donut hole.

This savings is due to certain provisions in the ACA. Beginning in 2011, the ACA provided Medicare recipients a 50% discount on brand-name prescriptions. By 2020, these changes will effectively close the coverage gap and rather than paying 100% of the costs, beneficiaries' responsibility will be 25% of the costs.

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The Michigan Supreme Court has issued its long-awaited decision in Jilek v Stockson, and it is a victory for healthcare providers.

The Supreme Court summarily reversed the Court of Appeal’s holding that the applicable standard of care for a physician board-certified in family practice medicine but practicing in an urgent care facility was that of an emergency medicine physician. The Supreme Court succinctly held, “[T]he appropriate standard of care was ‘family practice’ because the defendant physician is board-certified solely in family practice.” The Supreme Court added that it was proper to allow the jury to consider the setting in which the physician was practicing, i.e., urgent care as opposed to an emergency medical facility.

The Supreme Court also reversed the Court of Appeal’s holding that the urgent care center’s internal policies and procedures could be used as evidence of a breach of the standard of care. Interestingly, the Court did not author its own reasoning on this point but rather, incorporated by reference the dissent contained in the Court of Appeals opinion. It reasoned that this case was indistinguishable from prior case law holding that policies and procedures were inadmissible for purposes of establishing the standard of care. This rationale is consistent with long established public policy arguments in favor of protecting and encouraging best practices without fear of having those efforts used against them in court.

What this Means for Healthcare Providers

Health care providers can be reassured that courts will not be allowed to sanction the use of experts whose qualifications do not match the specialty in question; rather, their conduct will continue to be judged by someone with similar knowledge, skill and experience, in a setting- specific context.

Hospitals can be reassured that their internal policies and procedures remain inadmissible to establish the standard of care. While plaintiffs’ attorneys will likely continue their efforts to seek admission of policies and procedures for other reasons, they must still overcome a relevancy objection. Notably, Jilek does not address the threshold discoverability of policies and procedures.

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In August, we reported that Michigan had submitted an application to the Department of Health and Human Services (HHS) requesting a waiver of the Affordable Care Act's (ACA) medical loss ratio requirements for its individual health insurance, claiming that without a phase-in to the medical loss ratio requirements, many insurers would stop offering insurance in Michigan. Under the ACA, health insurers must spend 80% (individual and small group revenue) to 85% (large group revenue) of premiums on direct care for patients and efforts to improve care quality. This percentage is called the medical loss ratio (MLR). Starting in 2012, insurers who come short of the MLR must provide a rebate to their customers under the ACA.

Michigan's waiver application requested a phase-in of the MLR requirements between now and January 1, 2014.

HHS denied Michigan's request in full, finding that research in Michigan showed that most of its insurers were either profitable or adjusting business models to meet the 80% standard. This, according to HHS, showed no intent by the insurers to stop offering insurance in Michigan, and consequently that no waiver was justified.

Of the 17 states that have asked for adjustments to the MLR requirements, six have been turned down, five received partial exemptions, and only Maine had its full request approved. The rest of the applications remain outstanding.

Smith Haughey Rice & Roegge will continue to monitor this decision and its impact on Michigan.

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In an unpublished opinion on September 29, 2011, the Michigan Court of Appeals found that a physician cannot refuse to enter into a physician-patient relationship with a single woman seeking in vitro fertilization (IVF) treatment because the woman is single.

In Moon v. Michigan Reproductive & IVF Center, P.C., plaintiff Allison Moon contacted two fertility clinics and specifically asked if the clinics would provide IVF services to a single woman. Both clinics responded that they did not provide such services to a single woman. Moon filed a discrimination suit against both clinics, alleging a violation of the Elliot-Larsen Civil Rights Act (ELCRA) based on her marital status. The lower court dismissed the claim, stating that under that under the common law, a physician could refuse to enter into a physician-patient relationship with any individual for any reason or no reason at all. The lower court found that under the language of the ELCRA, discrimination was prohibited "except where permitted by law." Thus, the court found that since common law allowed a physician to choose who he or she wanted to enter into a physician-patient relationship with for any or no reason, the ELCRA was inapplicable to the physician-patient relationship.

The Court of Appeals reversed the lower court, finding that the ELCRA specifically includes the right to receive services at a place of public accommodation, including a health facility, and it would be against the purpose of the ELCRA to allow such a broad reading of the physician-patient relationship. As such, the Court of Appeals held that a physician may only deny his or her consent to enter into a physician-patient relationship with a potential patient based on legally permissible, nondiscriminatory reasons.

Smith Haughey will continue to monitor this issue.

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The Obama Administration has brought charges against 91 people nationwide who are accused of fraudulently billing the Medicare system out of nearly $300 million. Among those accused, 18 people have been indicted by federal investigators in the Detroit area. The Detroit defendants have been charged with fraudulently billing Medicare $28 million in separate health care schemes. Of those indicted, one doctor allegedly billed Medicare for services provided to dead people and claimed that he performed psychotherapy treatments for more than 24 hours a day.

The Detroit defendants include three physicians, four clinic owners and managers, two clinic employees, one nurse, and four physical therapists and physical therapy assistants. The charges show that Medicare fraud schemes in Detroit have branched out to newer areas, such as psychotherapy services targeting residents in adult foster care homes and home health care scams.

According to one indictment unsealed on September 9, 2011, 14 individuals are charged with conspiracy to commit health care fraud in a $14 million scheme to defraud Medicare by submitting fraudulent claims for home health services out of multiple home health agencies in Livonia. In addition, another physician and two other individuals allegedly submitted false claims for individual and group psychotherapy services at two Detroit clinics. Finally, an owner of a Southfield medical clinic was charged with conspiracy to commit health care fraud, health care fraud, and identity theft. The clinic owner allegedly used identities of Medicare providers and beneficiaries to bill for psychotherapy services that were never performed.

Since March 2007, nationwide law enforcement has charged more than 1,000 individuals who collectively have falsely billed Medicare for more than $2.3 billion.

Smith Haughey Rice & Roegge will continue to monitor the progress of the nationwide effort to eliminate Medicare fraud.

Charissa Huang assisted in the writing of this entry.

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On August 23, 2011, the Michigan Court of Appeals ruled that the patient-to-patient sale of medical marihuana is an enjoinable public nuisance,  meaning that the State can discontinue the activity due to its negative effects on the surrounding community, and that the operation of medical marihuana dispensaries violates the Michigan Public Health Code (PHC). The Court further found that the sale of medical marihuana is not excused by the Michigan Medical Marihuana Act (MMMA) because the MMMA does not address patient-to-patient sales of marihuana.

In State of Michigan v. McQueen, the defendants owned and operated Compassionate Apothecary, LLC, a medical marihuana dispensary by which members who are either registered qualifying patients or their primary caregivers would purchase marihuana that other members had grown in excess of their medical needs and stored in lockers rented from the Apothecary. The Apothecary would facilitate the purchase and collect a 20% service fee on each sale.

The Michigan Court of Appeals found that the PHC governs the manufacturing, distributing, prescribing, and dispensing of controlled substances. The PHC defines marihuana as a Schedule 1 controlled substance, meaning it has been found to have a high potential for abuse and has no accepted medical use in treatment or lacks accepted safety for use in treatment under medical supervision. As such, except for certain circumstances involving medical research by a licensed practitioner, the PHC makes the possession of marihuana a misdemeanor offense and the manufacture, creation, and delivery of marihuana a felony offense.

The Court further found that the MMMA, which excuses the medical use of marihuana in certain circumstances, does nothing to change this rule under the PHC.  The MMMA does not "legalize" marihuana, but simply offers certain circumstances where criminal liability for its use can be avoided. According to the Court, the MMMA does not authorize dispensaries and does not state that patients can sell their marihuana to other patients. As such, the MMMA does not "excuse" this activity, and rather, it is governed by the PHC, which makes the sale of marihuana illegal.
 

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On July 28, 2011, Michigan submitted an application to the Department of Health and Human Services (HHS) requesting a waiver of the Affordable Care Act's (ACA) medical loss ratio requirements for its individual health insurance.

Many insurance companies spend a portion of consumers' premiums on administrative costs and profits, including executive salaries, overhead, and marketing. Under the ACA, consumers will receive more value for their premiums. New regulations require health insurers to spend 80% (individual and small group revenue) to 85% (large group revenue) of premiums on direct care for patients and efforts to improve care quality. This percentage is called the medical loss ratio (MLR). Starting in 2012, insurers who come short of the MLR must provide a rebate to their customers under the ACA.

To compensate for transitional difficulties, the ACA allows the Secretary of Heath and Human Services to adjust the MLR standard for a State "if it is determined that meeting the 80 percent medical loss ratio standard may destabilize the individual market and . . . result in fewer choices for consumers." On July 28, 2011, Michigan submitted an application to HHS, requesting an adjustment to the MLR standard. The request may be found here.

Michigan's application requests a phase-in of the MLR requirements between now and January 1, 2014 where the MLR for 2011 would be 65%, followed by 70% for 2012, and 75% for 2013. Michigan's request stated that without this adjustment to its MLR requirements, "fourteen (14) companies would be scheduled to issue rebates totaling $30.6 million, with eight (8) paying rebates in excess of their after tax profit for 2010." This could lead such insurance companies to stop offering health insurance in Michigan. Currently, "the market is dominated by one insurer, Blue Cross Blue Shield of Michigan, [who] already operates at an MLR [of 93%]." Thus, the loss of competitors could substantially reduce a consumer's choice of where to purchase health insurance. In addition to Michigan's request, U.S. House Representatives Dave Camp and Fred Upton have together submitted a letter to HHS in support of Michigan's adjustment.

According to the HHS website, Michigan's application is under review for completeness. Upon a finding by HHS that the application is complete, public comment will be invited regarding Michigan's request for ten days.

Smith Haughey Rice & Roegge will continue to monitor the progress of Michigan's request to adjust federally mandated MLR requirements.

Summer Associate Peter Afendoulis assisted in the writing of this entry.

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On July 11, 2011, the U.S. Department of Health and Human Services (HHS) published two Notices of Proposed Rulemaking (NPRM). The first proposed rule, the Exchange NPRM, will enable States to build Affordable Insurance Exchanges (AIE). AIEs are new State-based competitive insurance marketplaces created under the Affordable Care Act. The second NPRM addresses standards related to re-insurance, risk corridors, and risk adjustment to assure stability in these newly established markets. The main topics of the proposed NPRMs include standards for:

1. States that elect to establish and operate an Exchange;
2. Health insurance plans to participate in an Exchange;
3. Enrollment in health plans through Exchanges; and
4. Employers who opt to participate in the Small Business Health Options Program (SHOP).

These exchanges are intended to level the playing field for individuals and small businesses by consolidating their purchasing power, making it easier for them to comparison-shop among a larger field of competing plans and ensuring that all available options meet minimum standards.

The law will offer tax credits to offset the cost of insurance for small businesses with 25 or fewer employees. However, states will be able to set the size of small businesses that can buy insurance through the exchange at anywhere from 50 to 100 employees through 2016. Furthermore, States may open the exchanges to larger companies after this time. "Flexibility is the name of this game," said Donald Berwick, administrator of the Centers for Medicare and Medicaid Services.

Both NPRMs may be found here.  

Smith Haughey Rice & Roegge will continue to monitor the progress of new State-based competitive insurance exchanges created under the Affordable Care Act.

Summer Associate Peter Afendoulis assisted in the writing of this entry.

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On June 29, 2011, a three-judge panel of the U.S. Circuit Court of Appeals for the 6th Circuit upheld the constitutionality of a key part of the healthcare reform law - the requirement that Americans purchase health insurance. This provision of the healthcare reform law, also known as the individual mandate, is considered the most contentious portion of the law.

This ruling by the Sixth Circuit (which includes Michigan) marks the first decision by an appeals court regarding the constitutionality of the law, and it is the first of three decisions expected soon from appeals courts that heard arguments on the new law in recent months, including the 4th Circuit in Richmond and the 11th Circuit in Atlanta.

The Thomas More Law Center argued before the panel that the law was unconstitutional and that Congress overstepped its powers. The government countered that the measure was needed for the overall goal of reducing health care costs and reforms such as protecting people with pre-existing conditions. After hearing arguments from both sides, the panel found, by a 2-1 vote, that the minimum coverage provision is a valid exercise of legislative power by Congress under the Commerce Clause because the mandate regulates economic activity with a substantial effect on interstate commerce.

The Thomas More Law Center stated that the group will appeal this decision to the United States Supreme Court.

Smith Haughey Rice & Roegge will continue to monitor the activity of this decision and its progress in the Supreme Court.

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