Public Health Laboratories and the Affordable Care Act: What the New Health-Care System Means for Public Health Preparedness

The 2014 worldwide outbreak of Ebola Zaire virus serves as a sobering reminder of the importance of public health laboratories (PHLs) in identifying and tracking communicable disease. This installment of Law and the Public's Health describes how changes in health insurance and delivery under the Affordable Care Act may affect the financial environment in which PHLs operate, and discusses legal and policy options for ensuring their ongoing ability to effectively respond to public health needs in an era of system transformation.

BACKGROUND: PHLS AND THE AFFORDABLE CARE ACT

PHLs are a critical component of the public health system, protecting the nation's health by helping to identify and track communicable diseases, prepare and respond to terrorist attacks, monitor environmental health hazards, and track food safety.¹ In recent decades, the United States has faced numerous new or recurring infectious disease threats, including anthrax, severe acute respiratory syndrome (SARS), 2009 H1N1, Middle East Respiratory Syndrome, and, most recently, the global outbreak of Ebola Zaire virus. Timely confirmatory testing of communicable disease is crucial for accurate decisions related to patient care, contact tracing, and environmental decontamination. Optimal functioning of the public health and health-care systems to meet these infectious disease threats depends on the unique services that state and local PHLs provide.²

Despite substantial efforts to prepare for new Ebola cases—with 46 PHLs having the capacity to test for Ebola as of December 2014³—PHLs face significant budget, workforce, and other challenges that threaten their ability to respond to serious outbreaks.^4,5 President Obama has requested $1.83 billion in emergency funding from Congress for the Centers for Disease Control and Prevention (CDC) to improve Ebola readiness within public health departments and laboratories.⁶

Although enhanced federal resources will be indispensable in combating the current epidemic, PHLs today face additional challenges beyond discretionary funding concerns. Unlike the SARS and H1N1 outbreaks of the past, PHLs responding to Ebola are working within a health-care system that is transforming in response to the coverage and delivery system reforms of the Affordable Care Act in ways that could threaten PHLs' sustainability.

The Affordable Care Act and expanded coverage of laboratory services

The Affordable Care Act has resulted in a major expansion of health insurance. Through the establishment of new, subsidized health insurance marketplaces in every state and expansion of Medicaid, the U.S. Congressional Budget Office has estimated that the number of insured people grew by 12 million in 2014.⁷ By 2016, a projected 25 million more will be insured, including 13 million more covered by Medicaid and the Children's Health Insurance Program (CHIP).⁷

The newly insured will gain coverage for many laboratory services. The Affordable Care Act requires all health insurance plans sold in the individual and small group markets, inside or outside the new state-level Exchanges Marketplaces, as well as Medicaid coverage for the newly eligible expansion population, to cover certain “essential health benefits.”^8,9 Essential health benefits consist of 10 distinct benefit classes, including laboratory services. In addition, the Affordable Care Act requires significantly expanded insurance coverage without cost sharing of a comprehensive set of preventive services, including many types of laboratory tests.¹⁰ These laboratory tests include tests for conditions that typically engage the involvement of the public health sector, such as human immunodeficiency virus, chlamydia, and lead poisoning.

AFFORDABLE CARE ACT COVERAGE EXPANSIONS: POTENTIAL IMPLICATIONS FOR PHLS AND PUBLIC HEALTH EMERGENCY PREPAREDNESS

The expansion of health insurance and preventive service coverage under the Affordable Care Act raises two important sustainability concerns for PHLs, both of which impact their preparedness to serve the public's health. First, screening and testing services provided by PHLs have been largely covered by public funds, including city, county, state, and federal sources. PHLs have historically used a portion of infectious disease funding from public sources to maintain capacity to carry out activities related to other core functions. In many jurisdictions, these funding streams have helped PHLs maintain staff with specialized expertise to conduct outbreak surveillance and contain epidemics. However, as more individuals gain insurance coverage, discretionary funds for PHLs could be scaled back on the assumption that financial support for laboratory services will come through insurance reimbursement.¹¹

There are a number of problems with this assumption. One problem relates to the fact that many PHLs historically have been supported through direct financing and may lack the capacity to bill insurers for services because of software and/or staffing limitations. Some states also have restrictive mandates that, for example, prohibit PHLs from charging any fee, even to a third-party insurer.¹² Even where PHLs have the authority and capacity to bill for services, they may find that their fees are non-competitive in relation to the low fees offered by high-volume private, clinical, and commercial laboratories.¹³ The inability to compete on price may in turn create barriers to insurance network inclusion.

Second, even where billing and network inclusion are in place, insurance coverage and payments may be insufficient to cover the cost of PHL operations. Despite coverage expansions under the Affordable Care Act, millions of people will continue to lack insurance coverage, and millions more may experience breaks in coverage as they move among sources of insurance.^14,15 Continued dependence on public financing by millions of people would be coupled with disruptions flowing from network exclusion. The result, in the absence of direct financing, can be expected to be a serious drop in testing and significant budget shortfalls.¹⁶

One option is to place greater dependence on private testing laboratories during disease outbreaks, effectively delegating to private laboratories front-line responsibility during periods when rapid outbreak testing and response are crucial. But this level of reliance would greatly threaten national and local preparedness. Private laboratories focus on individual patient care and are not legally or programmatically structured to safeguard the health of entire communities. They are susceptible to market forces and cost-containment pressures that may disincentivize the need to maintain readiness with adequate equipment. They may lack the expertise to handle complex and emerging communicable diseases. Furthermore, private laboratories are not integrated into the broader public health system and, consequently, do not serve other critical core functions addressed by PHLs, such as contact tracing, environmental decontamination, and providing surge capacity to other PHLs during times of crisis.^1,17

DISCUSSION

Integrating PHLs into health system transformation efforts now underway in the wake of the Affordable Care Act thus becomes a crucial challenge for public health law and policy. Several options might be considered in this regard. Clearly, the starting point is ensuring that all PHLs are capable of billing insurers for covered services. A second step is to ensure that PHLs are capable of billing at competitive rates, by providing ongoing direct financing for core public health functions and testing activities related to uninsured populations and services.

An option for ensuring that PHLs do not become dangerously marginalized as an unintended consequence of health system change is to require their inclusion in networks offered by public and private health insurers, including Medicaid managed care organizations, health plans participating in CHIP, and health plans sold in the individual and small group market, whether inside or outside health insurance Exchanges. In addition, in defining the classes of “essential community providers”—safety net providers who must be included at certain levels in state-level Exchanges¹⁸—the federal government could designate PHLs as such a provider type, thereby promoting their participation in health plans.

Network inclusion of PHLs could be considered for all forms of testing or, alternatively, for those tests that are related to certain key conditions with major public health implications, such as sexually transmitted diseases, communicable disease outbreaks, and other health conditions of public health importance. In the absence of mandated inclusion, states might consider incentivizing inclusion in various health insurance markets by, for example, giving higher quality ratings for health plans whose networks include PHLs. The Centers for Medicare & Medicaid Services (CMS), which oversees the Medicare Advantage market (now enrolling 30% of all Medicare beneficiaries¹⁹), could similarly give higher star ratings to Medicare Advantage plans that include PHLs in their networks.

PHLs might also take steps to position themselves for inclusion in emerging provider networks as a result of advances in clinical integration, such as the formation of accountable care organizations, a new mode of clinically and financially integrated service delivery whose formation and operation are promoted under the Affordable Care Act.^20,21 Accountable care organizations are expected to engage with patients not only with respect to individual clinical care, but also at the population level, making PHLs—long accustomed to population-level interventions—attractive laboratory partners. Efforts by CMS to promote system transformation through various strategies, such as State Innovation Models,²² could be structured to emphasize transformation efforts that include PHLs. In carrying out community health needs assessment activities mandated under the Affordable Care Act,²³ tax-exempt hospitals also could include PHLs in their needs assessments and implementation strategies. PHLs offer expertise in clinical prevention and screening, and their inclusion in initiatives to change the way that health care is financed and delivered will help ensure a sustained revenue source going forward, thereby reducing the need for direct financing for uninsured populations and services.

CONCLUSION

The Affordable Care Act and ongoing changes in the health-care system have had important consequences for PHLs, including reduced testing volume and funding. Combined with perennial budget cuts, these changes may threaten PHLs' ability to respond swiftly to ongoing public health needs and unexpected health threats. If direct financing of clinical laboratory services disappears, and if insurance and delivery system regulation fails to halt their network exclusion, PHLs will struggle to maintain essential funding and capacity. Through a combination of transformation incentives, base funding for core and uninsurable activities, and careful use of regulatory authority related to provider networks, policy makers can preserve this core public health function.