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Appendix B
The Patient Protection and Affordable
Care Act: Opportunities for Public
Health Agencies and Population Health
Sara Rosenbaum, JD
INTRODUCTION
This analysis, prepared for the Institute of Medicine (IOM) Committee
on Public Health Strategies to Improve Health, examines provisions in the
Affordable Care Act (ACA) that present opportunities for public health
agencies to support their activities to improve population health.
While insurance reform is the centerpiece of the ACA, in fact these pro-
visions, along with many others, can be understood as a national blueprint
for reorienting Americans toward a broader and deeper vision of health.
No single section of the ACA holds all of the population health elements
of the law; instead, the goal of improved health for all Americans pervades
the legislation through an exceptionally wide range of strategies. Some of
these strategies are aimed at infusing a greater prevention orientation into
health care itself. Others represent policies that over time have the poten-
tial to improve health itself, empowering individuals and communities to
make healthier choices and lead healthier lives. The National Prevention
Strategy, whose creation was a requirement of the ACA (HHS, 2011a;
National Prevention Health Promotion and Public Health Council, 2011),
reflects this aim, and public health agencies have an important role to play
in its realization.
Resources are key to public health agencies’ ability to play a central
implementation role. Some of these resources may entail direct financial sup-
port for agency activities. Others can be thought of as derivative resources—
that is, resources that will ultimately enable public health agencies to achieve
the aim of population health, even if they do not flow directly through
129
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130 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE
agencies themselves. Because empowerment and regulation represent key
functions of public health, it is important that public health agencies define
what it means to receive support for their activities to include many sup-
port pathways, both direct and indirect. Doing so means that public health
agencies must create seats at many tables, including tables involving the
allocation of resources under the ostensible control of the private sector or
other agencies. But because the ACA is prevention oriented, opening doors
related to system design, oversight, and accountability may be easier than
it has been in the past.
This analysis emphasizes certain provisions that have the potential to
yield resources for population health goals and for public health agencies.
Of special interest are provisions with implications for populations and
communities that by virtue of income, age, place, disability, race, ethnic-
ity, or language face an elevated risk for health disparities and poor health
outcomes.
The first section reviews ACA provisions related to both health insur-
ance coverage and care and identifies key implementation decisions that
have the potential to yield public health resources (including a resource flow
directly to public health agencies depending on how they are structured and
operated). The resource flow from these provisions often may be indirect,
since advances in the public’s health depend on empowerment, advocacy,
and regulatory intervention (IOM, 2003a), it is important to identify these
flows of funds whenever possible as strategic opportunities for public health.
Indeed, how actively public health agencies are able to use these tools to
reach beyond their own jurisdictional borders (that may be broad or nar-
row depending on the state) will help determine the full realization of the
law’s preventive vision.
The second section focuses on two ACA provisions that bear more
directly perhaps on financial support for public health agencies. The first is
Community Transformation Grants. The second is the community benefit
reforms to the Internal Revenue Code that apply to nonprofit hospitals
that seek federal tax exempt status and that have implications for state tax
exempt policy as well. These reforms should be considered as a pair because
of their potential to strengthen and reinforce one another.
PUBLIC HEALTH AGENCIES AND ACA PROVISIONS
RELATED TO COVERAGE AND CARE
The establishment of a national system of health insurance lies at the
heart of the ACA. When fully implemented, the law’s reform provisions
are expected to result in coverage to between 92 and 94 percent of the
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131
APPENDIX B
nonelderly population.1 The ACA’s protections are universal in nature.
Nonetheless, it is fair to observe that the principal beneficiaries are both
individuals and rural and urban communities2 facing an elevated risk of
poor health outcomes, health disparities, and medical underservice. The
ACA’s investment in these communities and populations is considerable: of
the 32 million individuals expected to gain coverage under the act, 16 mil-
lion are expected to qualify for Medicaid (CBO, 2010),3 while an estimated
80 percent of the 24 million individuals are qualified to purchase coverage
through state health insurance exchanges also are expected to be eligible
for premium tax credits (KFF, 2011b). In addition, the ACA makes direct
investments through a major expansion of programs targeted directly into
these communities such as the National Health Service Corps and commu-
nity health centers (PPACA §§5207 and 5601; Health Care and Education
Reconciliation Act [PL 111-152, 111th Cong. 2d sess.] §2303), two invest-
ments discussed at greater length below.
Given the relationship between health insurance resources and health
system financing, the question of how this expanded coverage is imple-
mented is a matter of critical importance to public health. In this regard,
the ACA orients insurance reforms in a decidedly public health direction,
with an emphasis on prevention and more effective and efficient manage-
ment of serious and chronic conditions that affect population health. Under
the ACA, certain clinical preventive services without cost-sharing must be
made available on a population-wide basis.4 Furthermore, embedded in
the definition of “essential health benefits”—which will define the scope of
coverage in the individual and small group market, as well as for newly eli-
gible Medicaid beneficiaries—is a strengthened orientation toward coverage
for the management of serious conditions associated with health disparities
(see Box B-1).
1The penetration rises if only citizens and legally present aliens are considered (see Letter
from Douglas Elmsdorf to the Honorable Nancy Pelosi [CBO, 2010]).
2Nearly 100 million persons are residents of communities designated as medically under-
served, while over 67 million live in areas designated as experiencing a shortage of primary
health care professionals (Rosenbaum et al., 2009). Within these populations, 28 percent (a rate
that exceeds twice the national average for the U.S. population) are uninsured. Being uninsured
is closely associated with low family income and elevated risk for reduced health. The commu-
nity health impact of an extensive lack of coverage has been documented by the IOM (2003b).
3See letter from Douglas Elmsdorf to the Honorable Nancy Pelosi (CBO, 2010).
4PPACA §1001 adding PHSA §2713; PPACA §1563(e) adding ERISA §715 and extending
preventive provisions to all employer-sponsored health plans governed by Employee Retire-
ment Income Security Act (ERISA), whether insured or self-insured. Grandfathered plans
satisfying federal standards applicable to the preservation of grandfathered status are exempt.
PPACA §1251.
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132 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE
BOX B-1
ACA Coverage: Provisions Related to
Public Health Agency Activities
Preventive and wellness services (no cost-sharing)
• vidence-based items and services with an “A” or “B” rating from the U.S.
E
Preventive Services Task Force
• mmunizations recommended by the Advisory Committee on Immunization
I
Practices
• vidence-informed preventive care and screenings for infants, children, and
E
adolescents recommended in Health Resources and Services Administration
(HRSA) screening guidelines
• reventive care and screenings for women recommended in comprehensive
P
HRSA guidelines
Public health-related diagnostic and treatment services included in the
essential health benefit package (cost-sharing support for low-income
individuals and families)
• hronic disease management
C
• ediatric services including oral and vision care
P
• aternity and newborn care
M
• ental health and substance abuse disorder services
M
Health Insurance Exchanges
States are in the process of establishing health insurance exchanges
that will serve as a central entry point into coverage for individuals eligible
for Medicaid, the Children’s Health Insurance Program (CHIP), and tax
credits, as well as small employers. How states design their exchanges,
how exchanges are governed, the ground rules set by states for qualified
health plans, and the steps states take to prevent adverse selection against
the exchange market will determine the quality and affordability of cover-
age for low- and moderate-income families as well as small employers. In
short, establishing and operating an exchange raises a broad array of policy
considerations for public health agencies.
Exchange Governance
An exchange can be a governmental or nonprofit entity, and the ex-
pectation is that governance and advisement will be provided by a broad
representative body. Because exchange design and operations will have a
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133
APPENDIX B
significant impact on accessibility to historically underserved populations
with elevated health risks, an important issue will be whether public health
agencies can bring their expertise to bear through exchange governance and
oversight activities. Governance of the exchange will reach all of the major
decisions that ultimately determine the accessibility, quality, continuity, and
stability of coverage
• P
opulation outreach,
• S
implified enrollment into health plans in a culturally appropriate
manner,
• T
he accessibility of health information in the range of languages
that are spoken,
• E
ase of access to subsidy determinations and a simplified determina-
tion process,
• S
tandards for qualified health plans,
• H
ealth plan performance and oversight and monitoring, and
• T
he availability of public information about plan performance.
As of June 2010, 10 states had enacted exchange legislation,5 with leg-
islation pending in 12 additional states (CBPP, 2011).6 An important step is
the involvement of public health agencies in exchange governance, as well
as service on committees established by an exchange to tackle critical imple-
mentation matters. Public health agencies also will be important sources
of technical support for exchange regulatory and oversight operations,
particularly in the design of qualified health plan certification standards,
standards governing exchange navigator programs, the identification of key
population health issues of special importance to an exchange when evaluat-
ing the capabilities of qualified plans, and the analysis of performance data
across multiple plans.
Certification Standards for Qualified Health Plans
Exchanges may make health plans available only if certified as “quali-
fied health plans” (PPACA §1311[d][4]). Federal law establishes basic stan-
dards for qualified health plans (e.g., coverage of essential health benefits,
state licensure, offering both silver and gold levels of coverage in the ex-
change, and uniform cross-market pricing) (PPACA §1302[a][1]). But state
exchanges may establish additional certification standards and furthermore
may select among qualified health plans rather than allowing participation
5California, Colorado, Connecticut, Hawaii, Maryland, Nevada, Oregon, Vermont, Wash-
ington, and West Virginia.
6Alabama, Illinois, Indiana, Maine, Minnesota, New Hampshire, New Jersey, New York,
North Carolina, Pennsylvania, Rhode Island, and Washington, DC.
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134 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE
by all plans that technically qualify (PPACA §1311[d][2]). Given their ex-
pertise in clinical preventive care for at risk populations and chronic disease
management, public health agencies play a potentially important role in
helping shape qualified health plan certification standards in seven key areas
1. The evidence-based practice guidelines for prevention and wellness
services that plans will be expected to use,
2. Whether plans make available enabling services such as translation
and transportation,
3. The composition and capabilities of plans’ provider networks,
particularly in the case of plans operating in medically underserved
communities,
4. The network incorporation of “essential community providers”
(PPACA §1311 [c][1][C]),7
5. Making available to public health agencies clinical data as well as
the results of performance measurement activities so quality can be
measured and population health can be monitored on a cross-plan
basis,
6. Plans’ use of value-based coverage design,8 and
7. Provider performance payment incentives that encourage providers
to practice in the most efficient manner possible.
An additional and important area of public health focus would be
participation of qualified health plans across all markets in which subsidies
(e.g., Medicaid, CHIP, and premium tax credits), in order to ensure that in-
come fluctuation does not result in forced disenrollment from a health plan
and interruption in continuity of care. (Over the course of a year, 50 percent
of nonelderly adults with incomes under 200 percent of the federal poverty
level can be expected to shift between Medicaid subsidies and exchange
premium tax credits and back again [Sommers and Rosenbaum, 2011].)
State Benefit Mandates
Under the ACA, states may require qualified health plans to offer ben-
efits required under state benefit mandates that fall outside of the federal
7Federal law defines essential community providers as providers that serve “predominantly”
low-income medically underserved individuals and requires the secretary, in implementing
rules, to establish basic network inclusion standards. A state may add to these standards,
which are framed as “minimum” standards. At a minimum, essential community providers
include providers that are recognized under the Section 340(B) discount prescription drug
program (Section 340B[a][4]) of the Public Health Service Act and Medicaid’s drug rebate
discount program.
8Of particular importance will be nominal cost-sharing for health maintenance activities
such as medication adherence.
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135
APPENDIX B
essential health benefit categories. States that elect to require these ad-
ditional benefits will be required to subsidize their incremental premium
cost (PPACA §1311[d][3]). An important implementation question will be
determining whether certain state-mandated benefits fall outside the scope
of essential health benefits (once federal regulations are issued) and yet are
of sufficient importance to merit coverage and additional supplementation
as a population health matter. Given their preventive and chronic care ex-
pertise, as well as their knowledge of health disparities, public health agen-
cies bring important expertise to bear on the question of whether certain
additional state benefits should be incorporated into qualified health plan
benefit design.
Navigators
The ACA requires states to finance navigators as part of their exchange
operations (PPACA §1311[i]) in order to assure that eligible individuals
and families are linked to coverage and empowered in its appropriate use.
Public health agencies, using their expertise in population health and health
disparities and their knowledge of health and risk communication, can play
an important navigation role at several critical junctures. The first is out-
reach to eligible families and individuals and enrollment assistance in the
appropriate form of financial assistance in relation to family income (e.g.,
exchange advance premium credits, Medicaid, CHIP, and other state subsidy
programs). The second is providing ongoing support to assure that individu-
als and families promptly report changes in income that might affect the
source or level of subsidy they receive in order to avert the loss or reduction
in subsidies and the possibility of recoupment liability for improperly paid
premium credits, which can be as high as $600 for a low-income family.9
A third support activity focuses on selection of a health plan and coun-
seling on the effective use of coverage related to wellness, preventive clinical
care, and disease management. A fourth is member and patient education
regarding the development of strong and stable relationships with network
primary health care providers, effective care-seeking practices, avoidance
of medical emergencies in the case of ambulatory care-sensitive conditions,
and self-empowerment health practices such as diet and exercise. (Patient
education practices might be funded through navigation support as well
as through health plan payments to health agencies for health education
services.)
9The maximum recoupment amount for persons with family incomes under 200 percent
of the federal poverty level was increased to $600 by PL 112-9, the Comprehensive 1099
Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (112th
Cong., 1st sess.).
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136 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE
Internet Portal Design and Operation
All health insurance exchanges will be required to maintain Internet
portals (PPACA §1311[d][4][C]) that offer standardized information about
health plan offerings. Public health agencies potentially play a significant
collaborative role in the portal design and content, particularly in the range
of consumer and patient information to be made available through a portal.
An important focus would be the development of guidance for individuals
and families on preventive and health management considerations in plan
selection and additional guidance in plan selection for consumers with el-
evated health risks. Similarly, health agencies possess expertise in assuring
that health information is presented in a culturally appropriate manner and
with due consideration regarding consumers’ level of health literacy.
Health Plan Network Adequacy and Use of Essential Community
Providers
Qualified health plans must be able to demonstrate the accessibility of
their provider networks as well as their use of essential community providers
(in accordance with federal standards that will govern the inclusion of such
providers in plan networks) (PPACA §1311[c]). Because of their familiarity
with community health systems and health care seeking patterns among the
population, health plans’ consultation to exchanges on how to measure plan
network adequacy can be crucial. For reasons related to both moral hazard
and adverse risk selection, health plans may resist inclusion of certain crucial
providers such as family planning programs, school-based clinics, clinics
operating mobile homeless units, clinics serving migrant farmworkers, and
clinics located in public housing projects, to name only a few such examples.
Without clear anchoring in community health systems, it is possible that
coverage will translate into very little in the way of care improvement. In
the same vein, public health agencies may play an important role in iden-
tifying such providers and working with them to enable their readiness to
be network participants.
Medicaid Reforms
Preventive Care for Traditional Beneficiaries
In a preventive benefits context, the ACA creates two groups of adult
beneficiaries: (1) newly eligible beneficiaries whose coverage consists of
“essential health benefits” encompassing preventive services enumerated
under the Public Health Service Act (PPACA §1001 adding PHSA §2713)
(i.e., the U.S. Preventive Services Task Force [USPSTF] A and B benefits;
Advisory Committee on Immunization Practices [ACIP]-recommended im-
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APPENDIX B
munizations; and HRSA-recommended screening and preventive services
for women, infants, children and adolescents); and (2) traditional Medicaid
beneficiaries (i.e., those eligible for coverage prior to the ACA expansion)
who remain entitled to Medicaid’s traditional benefit package. Preventive
services are a federal requirement in the case of traditional beneficiaries un-
der age 21 as a result of Medicaid’s Early and Periodic Screening, Diagnosis,
and Treatment (EPSDT) benefit but prevention is an option for traditional
beneficiaries ages 21 and older (42 U.S.C. §§1396a[a][10(A) and (a)(13)]).
The ACA incentivizes but does not mandate the addition of preventive
services for the traditional adult Medicaid population; instead, the law
authorizes a one-point Federal Medical Assistance Percentages (FMAP)
increase for states that elect to cover USPSTF A and B procedures or ACIP-
recommended vaccines (PPACA §4106).10 (No comprehensive study com-
pares current state Medicaid practice against USPSTF A and B rated items or
ACIP-recommended immunization services for adults.) However, anecdotal
evidence suggests that important preventive procedures and immunization
services may be lacking in some states. Upgrading Medicaid preventive
services for adults is an area in which public health agencies might play an
important technical support role, evaluating existing coverage and payment
practices within their states, proposing modifications and prioritization rec-
ommended, and recommending the use of modified clinical practice guide-
lines in the case of patients at risk for medical underservice (for example,
allowing payment for preventive services furnished in certain community
settings such as group homes for persons with mental disabilities). Under
existing Medicaid policy related to payment for administrative services of
skilled medical professionals, this type of activity presumably would qualify
for enhanced federal payment at a 75 percent federal contribution level.
Tobacco Cessation for Pregnant Women
Effective October 1, 2010, the ACA makes tobacco cessation services
a required benefit for pregnant women,11 defining such services as diagnos-
tic, therapy, and counseling and pharmacotherapy (both prescription and
nonprescription treatments approved by the Food and Drug Administration
[FDA] for use with pregnant women) in accordance with Public Health
Service guidelines. Services can be furnished by or under the supervision of
10The special Medicaid incentive does not reach HRSA-recommended child and adolescent
services or women’s health services, presumably because EPSDT and family planning benefits
(including preventive exams) already are required services for all traditional children and
pregnant women.
11PPACA §4107 adding SSA §§1905(a)(4)(D) and ACA §4108.
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138 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE
a physician or by any other health care professional authorized to furnish
such care and receive payment, and cost-sharing prohibitions apply.
Health departments can play an important role in benefit design and im-
plementation, both through direct services to women as well as in counseling
and supporting obstetrical care providers in the adoption of such coverage.
Health departments might also carry out data collection activities for Med-
icaid agencies aimed at documenting participation by women, adherence of
providers to prescribed treatment regimens and guidelines, and measuring
and linking participation to health outcomes through vital statistics data.
Incentives for Preventing Chronic Disease
The ACA authorizes the secretary of HHS to award grants to states to
develop chronic disease initiatives for Medicaid beneficiaries (ACA §4108).
Section 4108 of the ACA authorizes the secretary to extend grants to states
for incentives aimed at motivating Medicaid beneficiaries to successfully
participate in chronic disease prevention initiatives. The grant program
began January 1, 2011, or whenever the secretary develops program guide-
lines, and allows support to states for 3 years (SAMHSA, 2010). Programs
developed under the initiative must be “comprehensive, evidence-based,
widely available, and easily accessible” and must be “designed and uniquely
suited to address the needs of Medicaid beneficiaries” with a “demonstrated
success in helping individuals achieve” tobacco cessation, weight control,
lowering cholesterol and blood pressure, and avoiding diabetes onset or
managing diabetes (PPACA §4108 [a][3][A]). Programs also may address
related co-morbidities. Statewideness requirements normally applicable to
Medicaid can be waived. In establishing such a program, states may “enter
into arrangements with providers participating in Medicaid, community-
based organizations, faith-based organizations, public–private partnerships,
Indian tribes, or similar entities” (PPACA §4108 [a][3][D]).
States awarded grants must conduct outreach and education campaigns
to raise beneficiary awareness and must develop and implement systems for
tracking participation and measuring changes in health risk and outcomes
using clinical data as well as validated evidence of changes in beneficiary
behavior and risk. States also are expected to “establish standards and
health status targets” (PPACA §4108 [d][2][2]) for participants and mea-
sure whether their programs meet such targets and standards. States are
further required to submit semi-annual reports regarding use of grant funds,
assessment of “program implementation and lessons learned,” (PPACA
§4108 [2][B]) assessment of “quality improvements and clinical outcomes,”
(PPACA §4108 [2][C]) and cost-savings estimates. Incentives furnished to
participating beneficiaries cannot affect their entitlement to coverage or
eligibility for benefits.
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APPENDIX B
The incentives program represents an important opportunity for part-
nership between public health agencies and Medicaid programs. This
partnership can take a limited form (e.g., evaluation only) or can be more
comprehensive, including the design of the program, selection of participat-
ing providers and entities, program administration, and collection, analysis,
and reporting of results, including analysis of important longer-term policy
implications for coverage of preventive interventions as a general Medicaid
benefit at the end of the demonstration period.
Family Planning Coverage
The ACA creates a new state eligibility option related to coverage for
family planning services and supplies.12 Under this option, states may extend
coverage to certain individuals who otherwise are ineligible for Medicaid for
categorical reasons, financial reasons, or both. Because a number of states
have experimented with this eligibility option under special §1115 demon-
stration authority and the coverage has been found to be cost-effective, the
ACA amends the law to permit states to proceed to implement such cover-
age as a matter of state plan discretion and without federal demonstration
waiver authority. The new eligibile group consists of men and women who
are not pregnant and whose income does not exceed a state’s established eli-
gibility level (the highest income level for pregnant women under Medicaid
and CHIP in the state). To the extent that this group includes women and
men who will become eligible for more comprehensive Medicaid coverage
in 2014, taking this option will not affect a state’s eligibility for the higher
federal Medicaid payments that come with the expanded Medicaid eligibil-
ity standards that are mandatory under the ACA as of January 2014.
Benefits under this option consist of family planning services and sup-
plies (for which the special family planning 90 percent federal payment rate
is available) as well as “family planning related services,” which consist
of diagnosis and treatment services that are provided pursuant to a family
planning service and in a family planning setting. Examples would be
rugs to treat sexually transmitted diseases (STDs)13 discovered
• D
during a routine visit;
• F
ollow-up rescreening visits;
• D
rugs to treat lower genital tract disorders and skin infections, as
well as urinary tract infections discovered during a routine family
planning visit;
• I
mmunizations to prevent cervical cancer; and
12PPACA §2303 amending Social Security Act §§1902 and 1905.
13Excluding HIV/AIDS and hepatitis.
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142 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE
of poor health, and the health and social risks they face are considerable.
The ACA offers tools of great importance for this population, including
an expansion of preventive services,16 new tools and strategies for better
organizing systems of care for this population through Medicaid (PPACA
§§2703 [health homes] and PPACA §§2704 [integrated health care around
hospitalization]), and through new pilots developed by the Center for
Medicare and Medicaid Innovation (CMMI) (PPACA §3021). A focus on
access, equity, and safety for this population goes beyond being a matter of
patient-focused health quality and rises to the level of a population health
imperative because of the disproportionate levels of illness and disability
concentrated within the dual enrollee population and also because of the
enormous costs associated with their care.
Of particular importance in resolving issues of access, quality, safety,
efficiency, and system transparency for medically underserved populations
will be public health agency leadership and collaboration with entities that
share their broad mission: community health centers; public hospitals;
family planning agencies; teaching health centers created by the ACA and
eligible for grants and subsidies to train primary health care professionals
in community settings (PPACA §5508)17; and nonprofit hospitals with
community benefit obligations (discussed at greater length below) and at
financial risk for avoidable readmissions. These organized systems may also
be designed to incorporate other specialized activities made possible through
special grant funding, such as personal responsibility education, maternal
and infant home visiting, and services for women experiencing postpartum
depression (PPACA §§2951-2953 [maternal and infant home visiting, ser-
vices for postpartum depression, and personal responsibility education]).
Through joint planning along with a strategic approach to resource
16PPACA §4103 (annual wellness visit and personalized prevention plan); PPACA §4104
(removal of cost-sharing barriers to preventive services under Medicare); PPACA §3111 (pay-
ment for bone density tests); Health Care and Education Reconciliation Act of 2010 (HCERA)
§1101 (closing Medicare “donut hole”).
17PPACA §5508 authorizes the establishment of teaching health centers. HRSA guidance
provides that eligible entities include community-based ambulatory patient care settings that
operate (as opposed to simply participate in) primary care residency programs. While the
operational requirement acts as a limiting factor on broad community-based care involve-
ment, numerous community-based care programs partner with residency training programs,
and partnerships (in HRSA’s words, “central” partnership) are essential to qualification for
designation as a teaching health center. The training site must be “the primary recipient” of the
graduate medical education payments made available under the law. The community program
also must maintain operational responsibility over the program. Payments for this special
graduate training activity initially are set at $150,000 per resident annually, including both
direct and indirect funds. As used under the law, entities eligible for partnership with residency
programs include (but are not limited to) federally qualified health centers, community mental
health centers, rural health clinics, and family planning agencies receiving funding under Title
X of the Public Health Service Act (HHS, 2011b).
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APPENDIX B
deployment, public health agencies might assume a leadership position in
the alignment and integration of available resources (including their own
prevention, treatment, and health education grant funding) into more
comprehensive health care enterprises capable of reaching uninsured and
underserved patients with elevated health risks and designed to emphasize
practice efficiency and prevention, evidence-based performance, the full
integration of electronic health records with public health agency reporting
capabilities, and public reporting capabilities. Community benefit funding
as well as health center expansion funds for affiliation activities represent
potential sources of investment to help build these advanced practice models
of care and public health accountability. Many of the patients served in such
settings ultimately will be eligible for Medicaid or exchange coverage; and
other sources of public funding and community benefit resources may help
defray the cost of care for the uninsured.
In sum, public health agencies are positioned to play a central role in
the translation of health system reform and patient safety into integrated
delivery systems serving medically underserved populations.
COMMUNITY TRANSFORMATION GRANTS
AND TAX-EXEMPT HOSPITAL POLICY
Two population health-related reforms are of special interest because
of their potential to yield important investments in broader population
health activities. The first is community transformation grants; the second
is reforms in federal tax law aimed at generating greater community-wide
accountability on the part of nonprofit hospitals.
Community Transformation Grants
The ACA establishes the Community Transformation Grant (CTG)
Program (PPACA §4002), which has been implemented by the Department
of Health and Human Services (HHS) in two parts: Community Transfor-
mation Grants and a National Network.
Community Transformation Grants are to be awarded to state and
local governmental agencies, tribes and territories, and national- and com-
munity-based organizations. The purpose of the program is to “support
the implementation, evaluation, and dissemination of evidence-based com-
munity preventive health activities to reduce chronic disease rates, prevent
the development of secondary conditions, address health disparities, and
develop a stronger evidence base for effective prevention programming”
(CDC, 2011a). As implemented by the Centers for Disease Control and
Prevention (CDC), the program will support up to 75 communities across
the country over a 5-year time period, with projects increasingly expanding
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144 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE
their scope and reach “as federal resources permit.” Funding is available
for “capacity building” or implementation awards, and activities must grow
out of an area health assessment.
Under CDC guidelines, the CTG program focuses on (1) tobacco con-
trol; (2) active living and healthy eating; (3) evidence-based quality clinical
and other preventive health services, specifically the prevention and control
of high cholesterol and high blood pressure; (4) social and emotional well-
ness and mental health care access, especially for persons with chronic con-
ditions; and (5) healthy and safe physical environments.18 Priority is placed
on the prevention and reduction of type 2 diabetes and the control of high
blood pressure and cholesterol. Clinical preventive services are embedded
in the basic structure of the CTG program, making health care providers
a core partner in the types of broad-based coalitions whose involvement is
essential to the program. All applicants are expected to focus on tobacco-
free living, active living and healthy eating, and increased use of high-impact
quality clinical preventive services. Applicants also may choose to address
social and emotional wellness and a healthy and safe physical environment.
The National Network is aimed at community-based organizations
that are positioned to accelerate the speed with which communities adopt
promising approaches to health transformation. Under the award program,
National Network members can carry out this dissemination activity in
two ways: first, by disseminating “CTG strategies to their partners and af-
filiates;” and second, by supporting and funding subrecipients “to initiate
change and implement CTG strategies at the local level” (CDC, 2011b).
Recipients of awards that include a subrecipient component are expected to
support their subrecipients by helping them create leadership teams, iden-
tify “1-3 targeted policy, environmental, programmatic, and infrastructure
strategies,” create and participate in a “structured Action Institute,” and
provide technical assistance and guidance (CDC, 2011b).
Together, the CTG program and its National Network companion share
a set of simple yet profound purposes
• T
o launch multiple interventions whose goal is to make fundamen-
tal improvements in population health,
• T
o lessen the burden on the health care system while achieving its
central involvement in the effort,
• T
o develop a new approach to the collection and use of public
health information in order to bring an immediacy and action ori-
entation to longstanding surveillance practices, and
18Under the statute, worksite wellness promotion activities also are identified, but this is not
listed as a CDC priority (42 USC §300g-13[c] as added by PPACA §4201).
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APPENDIX B
• T
o speed the rate at which public health innovations are replicated
nationally, regardless of whether the replication sites receive CTG
support.
In this sense, the CTG program can be thought of as the public health
counterpart to the CMMI, whose mission is to test and speed the accelera-
tion of health care system transformation. As with the CMMI, the CTG
program has been conceptualized as an incubator whose sum is larger than
its parts. The CMMI is structured to stimulate transformational activities
on a multipayer basis; similarly, the CTG program is intended to stimulate
multisector population health investments that take direct aim at the risk
factors most responsible for death and disability in the United States: weight,
poor nutrition, inadequate physical activity, use of tobacco, and emotional
well-being and mental health.
Paradoxically, but not surprisingly given the ACA’s length and com-
plexity neither incubator program references the other, although one can
imagine numerous types of interactions. For example, CMMI pilots to bring
greater efficiency and quality to health care might be launched in communi-
ties that have received CTG awards and in which the National Network
activities are strong. In this way, patients receiving care through a funded
CMMI19 innovation site (such as team-based care for persons with serious
and chronic illness and disability) might also participate in CTG initiatives
in the community that are designed to improve overall mental health and
wellness by promoting healthy eating and physical activity for persons with
disabilities. National Network partners focused on the health and well-being
of persons with disabilities could, in turn, disseminate the “twinned” model
to other communities.
Given the ambitious reach of the CTG program, its long-term success
depends on more than a successful effort on the part of public health agen-
cies and their partners to conceptualize and undertake a successful interven-
tion in a single community. Rather, success in this context depends on the
ability of public health agencies to build partnership coalitions that include
all of the system stakeholders (including health care providers) essential to
a level of social transformation that alters how people think about their
own health and health care and use community resources. Furthermore,
success in this case will be driven significantly by the ability of local CTG
awardees as well as National Network partners to communicate activities
and results in a manner that lends itself to broad understanding, acceptance,
and replication.
19Examples of innovative patient care models in the law include patient-centered medical
homes, programs addressing the “unique needs” of women, care coordination for individuals
with multiple chronic conditions, and establishment of community-based health care teams
(PPACA §3021).
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As visionary as the CTG program might be, it also suffers from an
obvious limitation: the modest federal investment in pump-priming efforts
that in turn can be reinforced and strengthened through a companion series
of translational activities aimed at accelerating the pace of innovation. The
Prevention and Public Health Fund has an Achilles’ heel in its financial
structure. From a national policy perspective, the fund represents a break-
through: a broad reframing of public health investment strategy so as to
depart from the old pattern of specific and targeted categorical awards and
move toward a more community-driven and integrated approach. But the
fund rests on capped mandatory spending. Although out-year growth is pos-
sible, funding may fall well below the amount of pump-priming resources
that will be essential to public health transformation, especially given the
extraordinary constraints that now confront direct public spending on the
social welfare reforms.
At current levels, the CTG funding can reach only 75 communities,
far fewer than the number of pump-priming sites that ideally would be in
operation. Some sites may fail or never reach their full potential. Moreover,
in a nation of 300 million people living in thousands of communities, it may
take hundreds of launches to yield sufficient examples of what works across
the priority areas to in turn create a “back end” yield in terms of adoption
sites. And of course, the entire goal of acceleration through incubators and
networks may be inhibited by the reality that all federal capital investment
funds have been committed, with communities eager to follow suit but
potentially without the resources to get started.
Stated simply, in order to fully realize the potential of the CTG’s trans-
formational aims, it is important to locate additional sources of funding to
launch new interventions and expand the reach of existing activities.
Reforming Federal Standards for Tax-Exempt Charitable Hospitals
Background20
Section 501(c)(3) of the Internal Revenue Code (26 USC 501[c][3])
establishes the legal standard for determining whether nonprofit hospitals
will be treated as tax-exempt for federal income tax purposes. Historically
this standard has turned on a facts-and-circumstances approach, which
assesses the activities of individual hospitals to determine their tax-exempt
worthiness (IRS, 2011).
Until the late 1960s, the Internal Revenue Service (IRS) required hos-
20This background discussion is based in part on an earlier analysis by the author and col-
leagues (Burke, 2012, a project funded by the Robert Wood Johnson Foundation and a joint
project of the Foundation and the Hirsch Health Law and Policy Program at The George
Washington University).
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APPENDIX B
pitals seeking tax-exempt status to provide, to the extent of their financial
ability, free or reduced-cost care to patients unable to afford it. Under Rev-
enue Ruling 69-545,21 issued in 1969, the requirement for discounted care
(charged at rates below cost) disappeared, replaced by a so-called “com-
munity benefit standard.” Under the community benefit standard, the IRS
in theory evaluates hospitals based on whether they promote the health of
a broad class of individuals in the community. IRS enforcement, however,
has been “in theory” only; not only did the 1969 ruling make the standard
more nebulous, but government enforcement has, until recently, been virtu-
ally nonexistent. Private legal challenges to this policy shift failed under a
landmark U.S. Supreme Court decision holding that only Congress can alter
overturn IRS policy, and that individual taxpayers have no standing to sue
(Simon v EKWRO 426 U.S. 26 [1976]). Certain states have been more ag-
gressive in enforcing their own charitable conduct standards in relation to
property tax exemption policies, but the federal government has remained
essentially a passive onlooker.
In recent years, nonprofit hospitals came under increasing congres -
sional22 and IRS (2011) scrutiny, following numerous reports of failure to
discount or forgive bills in the case of indigent persons and the use of harsh
collection practices. A 2008 U.S. Government Accountability Office (GAO)
report valued the federal tax exemption alone at nearly $13 billion in 2002
(a figure that does not include the total value of the exemption to hospitals
when state tax laws also are considered) while noting the nonenforceability
of the 1969 standard. Prodded by Congress, the IRS conducted an assess-
ment and noted in a 2009 report that there existed “considerable diversity”
in hospitals’ community benefit activities. In 2008, the IRS required non-
profit hospitals to file supplemental information describing their community
benefit-related spending (IRS, 2007). However, given the limited nature of
the supplemental data collection, and the difficulties inherent in attempt-
ing to measure expenditures against what it means to provide community
benefit (Gray and Palmer, 2010), enforcement continued to lag.
Federal legislative proposals to tighten the standard were introduced but
went nowhere. In addition, over 45 class action lawsuits aimed directly at
hospitals rather than the IRS and challenging their federal tax exempt status
based on billing practices and harassment of the poor also were brought.
Virtually all of these suits failed because of questions related either to stand-
ing (similar to the problems that arose with earlier litigation) or the vagaries
of the standard itself. In sum, until enactment of the ACA, hospitals’ com-
21Rev. Rul. 69-545, 1969-2 C.B. 117. In the IRS’s words, Revenue Ruling 69-545 “remove[d]
the requirements relating to caring for patients without charge or at rates below cost” (Rev.
Rul. 69-5454, 1969-2 C.B. 117).
22Letter from Senator Chuck Grassley, Chairman of the Committee on Finance, to the
Honorable Donald L. Korb, Chief Counsel, Internal Revenue Service. June 1, 2006.
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148 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE
munity benefit activities remained largely a matter of individual hospital
discretion, state law requirements, and informal IRS guidance.
The Affordable Care Act (ACA)
The ACA amends the Internal Revenue Code (IRC) by adding a new
section 501(r), innocuously titled “Additional requirements for certain
hospitals” (PPACA §9007 adding IRC §501[r], 26 USC §501[r]). The new
requirements apply to all facilities licensed as hospitals as well as organiza-
tions recognized by the treasury secretary as hospitals (IRC §501[r][2]). In
the case of multihospital chains, each separate facility is independently held
to the new requirements (IRC §501[r][2][C]). Hospitals failing to meet their
obligations are subject to an excise tax of $50,000 for any taxable year in
which they are not in compliance (IRC §4959, added by PPACA §9007);
in addition, of course, they would experience the adverse publicity of being
found out of compliance, in a manner not dissimilar to the adverse publicity
that surrounds accusations of violations of the Medicare Emergency Medi-
cal Treatment and Labor Act.
The amendments impose new standards designed to assure financial
assistance to indigent persons, curb excessive charges on medically indi-
gent patients, bar aggressive collection tactics, and assure compliance with
federal emergency care requirements (IRC §501[r][3]). Of greatest interest
in the context of this analysis, however, is the obligation to undertake a
community health needs assessment and adopt an implementation strategy
that grows out of the needs assessment process.
The community health needs assessment (CHNA) process is a triennial
one (IRC §501[r][3]) that must commence not later than the taxable year 2
years after enactment. The CHNA must be accompanied by an implemen-
tation strategy that grows out of the needs assessment. The process thus
is dynamic, evolving, and action oriented. It occurs not once, but every 3
years; furthermore the CHNA must be accompanied by an implementation
strategy and, as noted below, ongoing reporting regarding implementation
efforts.
The ACA also establishes minimum requirements for the assessment
itself. Under the law, an assessment must “take into account” “input” from
persons who “represent” the “broad interests” of the “community served
by the hospital facility.” It is important to emphasize that the term used is
“community” and not the specific patients served by the hospitals. That is,
the statute appears to require that hospitals assess the needs of the entire
community covered by their service areas, including members of the com-
munity who may, for a variety of reasons, receive care elsewhere. Further-
more, where a hospital is a specialty hospital with a large geographic reach
(e.g., a children’s hospital or a hospital with a regional shock trauma unit),
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APPENDIX B
the needs assessment presumably will need to cover a community that is
coextensive with this larger service area.
The CHNA must include “those” with “special knowledge or expertise
in public health” (IRC § 501[r][3][B]) thereby underscoring the obligation
of facilities to involve knowledgeable individuals, not merely to use public
health data. In other words, the law emphasizes an assessment process that,
with respect to both content and process, is inclusive of public health prac-
tice and expertise. Even the term community health needs assessment is one
drawn from the public health literature (Robinson and Elkan, 1996; Wright
et al., 1998), further drawing the connection between hospital obligations
and public health practice. While the legislative history refers to hospitals’
ability to use public health information (Joint Committee on Taxation,
2010), the text itself underscores the inclusive nature of the obligation.
In addition, hospital assessments must be made “widely available” to
the “public.” The term public could denote the general public or public
within the hospital’s service area. The term available is not defined, but given
its overall goal of community health needs assessment, the text suggests
not only geographic availability but potentially availability in a cultural
and linguistic sense, as well as accessibility in a manner that complies with
federal laws aimed at assuring equal access (e.g., Title VI of the 1964 Civil
Rights Act, §504 of the Rehabilitation Act of 1973, and the Americans with
Disabilities Act).
Furthermore, covered hospitals must adopt an “implementation strat-
egy.” The term adopted is not defined, nor is the term implementation
strategy. The term adopted suggests in the context of hospital organizations,
a formal activity, while the term implementation strategy may or may not
mean the actual implementation of the plan or more simply, a strategy for
implementing the plan.
The secretary of the treasury (or delegate) is tasked with reviewing the
community benefit standard “at least once every 3 years” to ensure com-
pliance (PL 111-146 §9007). Furthermore, the law requires that hospitals
covered by the new reporting requirements must for each taxable year
provide their audited financial statements as well as a description of how
needs identified in the assessment are being addressed and which needs are
not being addressed and why (PL 111-146 §9007).
Formal IRS guidance describing the CHNA has not yet been issued, but
the needs assessment and implementation strategy elements already have
attracted the attention of senior HHS officials. CDC, with the active involve-
ment of IRS, has undertaken a significant initiative to convene public health
agencies, community partners, and hospitals to advance joint planning and
implementation strategy efforts.
CDC’s interest in section 501(r) makes enormous sense given the rela-
tively modest size of the CTG program and the magnitude of hospitals’
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150 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE
community benefit obligations. The potential dollar value of the law is of
considerable magnitude given the link between federal and state tax exemp-
tion policy. Furthermore, without the active involvement of public health at
federal, state, and community levels, hospitals may be inclined to reinvest
their obligation in their own direct patient care services. Furthermore, hos-
pitals may be inclined to plan and implement alone and in isolation rather
than through an integrated community effort.
This natural inclination to both act alone and to reinvest community
benefits back into the hospital’s direct care activities reflects the history
of hospital claims about how community benefits are invested (i.e., in
discounted care and contractual allowances). Furthermore, this fractured
approach to community benefit activities on the part of individual hospitals
and hospital chains may follow from the greater robustness and clarity that
section 501(r) has brought to hospitals’ uncompensated and discounted care
and to their obligation to provide emergency care.
It is possible, with active public health agency involvement, for a differ-
ent model to emerge around the considerable community benefit investment
that hospitals will be expected to make. This new model might be thought of
as a public health innovation in its own right, one that is as transformative
to the health of a population as a more traditional intervention, as well as
one that is totally consistent with both section 501(r) and the broad policy
aims of the CTG program. As in the creation of the CMMI, the CTG and
the Prevention and Public Health Fund reflect a fundamental congressional
desire to improve the health of the population through community-wide
interventions and act to reduce the burden on the health care system. The
purpose of the CTG program is to hasten the pace at which innovations in
public health policy are planned, designed, launched, conducted, evaluated,
and diffused. This cycle obviously takes money: money to convene stake-
holders, assess community need, and reach consensus; money to plan and
design the intervention; pilot funding to launch innovations such as worksite
wellness programs, accessible clinical preventive services in targeted commu-
nities and neighborhoods, safer and attractive destination points for active
living, new approaches to healthier nutrition such as community and school
food gardens, and services that promote emotional and mental health; and
money to support evaluation, diffusion, and public health policy translation.
The challenge for public health agencies is to rapidly put these tools
to work, both the funds that are clearly and directly earmarked for public
health activities through the CTG program, as well as the resources that
are held in trust by hospitals on their communities’ behalf. One way to ap-
proach the task might be to build hospitals into CTG partnerships in the
initial capacity-building phase of any project and then to carry these partner-
ships into implementation, when resources can be combined and augmented
to fund robust pilots and evaluations that are capable of taking root over the
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APPENDIX B
long run (hospitals’ community benefit obligations are perpetual and unlike
the Fund, section 501(r) obligations do not expire in 2015). Another strat-
egy for public health agencies not pursuing CTG funding directly is to use
the CTG model itself to develop community coalitions involving agencies,
hospitals, and the full range of stakeholders to convene, plan, implement,
evaluate, replicate, and diffuse. In this context, CTG can be thought of as
a template rather than a funding source.
CONCLUSION
The ACA offers a broad array of intervention points for public health,
in both a clinical prevention and community health sense. How health agen-
cies pursue these opportunities will help determine not only the achievement
of the ACA’s considerable public health aims but also the transformation of
public health agency policy making and practice.
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