By Laura Blinkhorn, CQ Staff

December 7, 2006 -- Disappointing expectations of many health policy wonks, Americans are not flocking to low-premium/high-deductible plans and those who have are not particularly satisfied, according to a report released Thursday by the Employee Benefit Research Institute (EBRI) and The Commonwealth Fund.

Though touted as a possible solution to the growing number of uninsured Americans, these insurance plans have failed to significantly attract uninsured Americans, the report found.

"It will be interesting to see if continually rising health care costs prompt more workers to conclude that the trade-off of lower premiums for higher deductibles, and potentially higher out-of-pocket costs, is worth it," said Dallas Salisbury, EBRI president and chief executive officer, in a press release.

Approximately 9.8 million adults, accounting for 8 percent of insured Americans, are enrolled in low-premium/high-deductible plans. The report found that 8.5 million of those adults qualified for health savings accounts, but did not have them because they could not afford to contribute to the accounts.

HSAs permit individuals who sign up for high-deductible health plans to contribute and withdraw funds to cover health care costs tax-free.

Created in the 2003 Medicare overhaul law (PL 108-173), proponents of such accounts say they will make consumers more aware of the cost of health care, which will reduce health care expenditures. HSA opponents say the accounts are most attractive to healthier individuals who, if they enroll in HSAs, will leave the group market, driving up costs for less healthy individuals left behind.

The report found that there is still considerable confusion about high-deductible plans, with just 20 percent of Americans familiar with them at all. It also found that while participants in high-deductible plans were more cost-conscious in their health care decisions than people enrolled in more comprehensive plans, they also were more likely to skip doctor's appointments or avoid filling prescriptions.

The report also found that adults in high-deductible plans were no more likely to have been uninsured before enrolling than adults in more comprehensive plans.

According to the Kaiser Family Foundation, over 46 million Americans were uninsured in 2005, up by 1.3 million from 2004. Two-thirds of uninsured Americans were low income.

Karen Davis, president of The Commonwealth Fund, concluded that a solution to the problem of the uninsured "will have to be a mix of public and private." She cited the example of Massachusetts, where the state subsidizes premiums for low-income citizens.

The report's findings are based on a survey of 3,158 Americans from ages 21 to 64 conducted through a 14-minute Internet questionnaire. In the survey, high-deductible plans were defined as having a deductible floor of $1,000 for individuals or $2,000 for families.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

December 5, 2006 -- A bipartisan group of House and Senate lawmakers, nursing home industry officials, and the nation's governors are urging Congress to stop the Bush administration's implementation of regulations that would trim Medicaid payments by $12.2 billion over the next five years.

Nursing home officials say one of those proposals—reducing the allowable provider tax from 6 to 3 percent—would reduce Medicaid reimbursements to nursing homes by $1.57 billion within one year. Limiting the extent to which states can tax providers, such as nursing homes, hospitals, and facilities for the mentally disabled, which would in turn reduce federal Medicaid matching payments.

"The implications are severe for the fragile elderly and disabled in our states. It will jeopardize seniors' access to quality nursing home care," Stuart Shapiro, president and chief executive officer of the Pennsylvania Health Care Association, said at a news conference Tuesday.

"It turns economic stability upside down," said Bruce Yarwood, president and chief executive officer of the American Health Care Association, a trade group representing long-term care providers.

Lawmakers said states likely would have to cut services to offset the funding shortfalls. "It means one less nurse or a nurse stretched thinner or one less therapist," said Rep. Shelley Moore Capito, R-W.Va., who also spoke at the news conference. Capito said her state would lose $45 million in Medicaid funding under the administration's plan.

Separately Tuesday, Department of Health and Human Services Secretary Michael O. Leavitt said the administration plans "no changes" in its proposal. "The administration's been clear in what they've planned to do and why they plan to do it and we'll see how it plays out," Leavitt said before addressing a national conference on long-term care.

Matt Salo, director of the National Governors Association's Health and Human Services Committee, said the administration's proposed changes also have implications for Medicaid funding in other areas, such as rehabilitation systems and how Medicaid interacts with school-based health programs.

Salo said the NGA, which opposes the administration's plan, has asked Office of Management and Budget Director Rob Portman to meet with the group to "talk about the impacts of what this might be before we move forward."

Administration officials are expected to issue regulations soon to implement the changes, which would most likely take effect in May. Yarwood said legislation to extend expired tax breaks or to stop a scheduled 5 percent cut in Medicare payments to physicians are potential legislative vehicles.

Yarwood said his group also is reviewing its options for a legal challenge if the regulations are implemented.

Lawmakers on both sides of the aisle also have asked the administration to not move forward with their proposed Medicaid changes. In June, 44 senators asked Leavitt to not make the spending cuts, stating that the reductions would force some rural nursing homes to close and limit services to the mentally disabled as well as harming some hospitals. In May, 82 House members also asked HHS to not make the changes.

By Cheyenne Hopkins, CQ Staff

December 6, 2006 -- Five major U.S. employers announced at a news conference Wednesday a partnership to develop an electronic health records framework for employees.

Applied Materials, BP America Inc., the Intel Corporation, Pitney Bowes Inc., and Wal-Mart announced they are funding the development of "Dossia," a Web-based framework where employees can maintain their personal health records.

With Dossia, the system will allow employees to organize their health record by manually entering data and gathering health information from various sources, which would be stored in a secured database. When Dossia is complete, it will begin drawing information from all available electronic health care sources for patients who request it. Individual electronic records, however, will be accessible only by employees or by others to whom they have granted permission.

"Dossia will empower individuals to manage their own health care, improve communications with their doctors, and ensure more complete and accurate information for health care providers than the current fragmented, paper-based system," said J.D. Kleinke, chairman and chief executive officer of the Omnimedix Institute, the non-profit organization developing Dossia.

President Bush has said that he wants most Americans to have an electronic medical record within 10 years and that such records will reduce health care costs and improve patient care. To help encourage hospitals, physicians, and other health care providers to invest in electronic health record systems, the Department of Health and Human Services announced in July a list of ambulatory, or outpatient, electronic health record systems approved by a federal panel.

On Aug. 22, President Bush issued an executive order requiring that providers and plans doing business with federal health programs meet "interoperability standards" when they acquire health information technology systems to ensure that those systems work well with each other.

Dossia is based on the Connecting Health Common Framework, a set of standards established by a public–private collaborative group whose goal is to advance health information technology.

According to the companies, records stored on Dossia will be portable, able to be distributed by a print out, transferable electronic method, or portable device. The records also will be transferable when employees change employers, health plans, or doctors.

Doug Henley, executive vice president of the American Association of Family Physicians, said having such a standardized portable record is beneficial for both the patient and physicians.

The database will be rolled out initially in mid-2007 to U.S. employees of the five founding companies, which represent 2.5 million employees, family members, and retirees. After the preliminary stage, it will be available to other health application developers and possibly later additional employers.

Kleinke said many have looked to the federal government to build a "highway" for electronic medical records, but a better way to build health IT is through consumers. This year Congress did not agree on legislation (S 1418, HR 4157) that would have promoted improvements in health IT.

"No, we're not counting on Congress," Kleinke said.

Craig Barrett, chairman of the Intel Corporation, said employers pay half of health care costs but they have so far been absent from the discussion. The five founding companies have invested at least $1 million in Dossia, and employers will pay a "nominal" sum in the long term, Barrett said. Kleinke added that once the infrastructure is built, the cost of maintenance will be small.

Government officials praised the move by the companies.

"The leadership of these companies in offering personal health records is encouraging, and I hope more employers will make similar commitments soon," HHS Secretary Michael O. Leavitt said in a statement Wednesday. "We know that the use of health IT based on recognized standards leads to better health care for patients at lower cost and with less hassle."

Centers for Disease Control and Prevention Director Julie Gerberding said Dossia also will be an important tool for disease and epidemic prevention.

However, some consumer advocates have raised privacy concerns with the use of electronic records.

Kleinke said provisions are in place in the system to address privacy, including an authentification system and adoption of electronic standards required by the Health Insurance Portability and Accountability Act, known as HIPAA. The 1996 law (PL 104-191) protects the use and disclosure of individually identifiable health information. Individuals opt-in to the Dossia system and then decide whom to share their entire or portion of their record. The data also will be organized on a fragmented system to prevent any security breach from having access to the whole record.

Linda Golodner, president and chief executive officer of the National Consumers League, said consumers need more control of their health privacy.

"I hope other employers have the same principles in mind—that it's hands off and it has to be in control of the consumers," Golodner said.

By John Reichard, CQ HealthBeat Editor

December 7, 2006 -- The Medicare Payment Advisory Commission unveiled a draft recommendation Thursday that would increase Medicare inpatient hospital rates in fiscal 2008 by a projected "market basket" increase in the costs of providing such care minus 0.65 percentage points. The subtraction from the market basket figure is an adjustment to account for growth in productivity of providing inpatient care.

The panel also unveiled a draft recommendation for Medicare outpatient hospital payments that would provide for the same level of increase for that sector: market basket minus 0.65 percentage points.

MedPAC, an independent federal body established to advise Congress on issues affecting the Medicare program, will vote on final versions of the recommendations at a meeting next month. MedPAC Chairman Glenn Hackbarth said the draft recommendations were the same as the payment recommendations made by the advisory commission last year and may well change once they are voted on in final form in January. They should merely be viewed as a starting point for discussion, he said.

American Hospital Association Senior Vice President for Advocacy Carmela Coyle said the draft recommendations would amount to an increase of 2.55 percentage points, but argued that the commission might not make the adjustment relating to productivity growth.

Even with a full market basket increase—which she said would be 3.2 percent in fiscal 2008—hospital profit margins on Medicare patients would decline, she said. Citing data released at the commission meeting Thursday, she said Medicare—reflecting both inpatient and outpatient services—would slide to a negative 5.4 percent, down from a negative 3.3 percent in 2005.

Making the case why the panel might vote for a full market basket increase, Coyle noted comments by commission member Ralph W. Muller that if ever there were a year for a full market basket increase, fiscal 2008 would be it. Muller noted that a negative margin of 5 percent "starts to be a serious number" and that the 2 percentage point slide in margins is probably "the biggest drop that we've projected all these years in a margin."

But another commission member, former Congressional Budget Office Director Douglas Holtz-Eakin, asserted that hospitals appear to be in good shape financially because of capital outlays by existing facilities and a desire by new players to get into the hospital market.

Medicare is only part of the story, however. Revenue from other insurers is boosting the financial condition of hospitals, lessening the ill effects of Medicare payments. Congress rarely grants a full market basket update to hospitals.

In another draft recommendation, MedPAC said that "indirect medical education" payments—known as "IME" and made to teaching hospitals ostensibly to reflect higher costs involved in providing care because of the education the facility provides to medical students—should be reduced by 1 percentage point in fiscal 2008. That would bring the payment add-on for IME down to 4.5 percent.

Under the draft recommendation, the money saved would be added back to payment rates for all hospitals. The rationale for the recommendation is that with the implementation of "severity adjustment" that would pay teaching facilities more for sicker patients, the IME payment they receive should be chopped.

Other draft recommendations called for eliminating a payment update for skilled nursing facilities and home health agencies, which on average showed healthy Medicare margins in 2005—13 percent in the case of freestanding SNFs and 16.7 percent in the case of freestanding home health agencies.

A draft recommendation for inpatient rehabilitation facilities would eliminate a payment update for those facilities in fiscal 2008. Although their Medicare margins averaged 13 percent in 2005, they are projected to fall to 2.7 percent in 2007 because of the "75 percent rule," which refers to the percentage of certain types of patients a facility must have to qualify for relatively generous inpatient rehabilitation payments.

But doing what MedPAC did last year might not be the right thing in the case of IRFs, said Hackbarth, apparently referring to the plummeting margins.

Similarly, a draft recommendation for long-term care hospitals would eliminate the payment update for those facilities in 2008. Its Medicare margins averaged 11.8 percent in 2005, but will fall to between zero and 2 percent in 2007, a MedPAC staffer said. A rule limiting how many patients acute care hospitals can refer to long-term care hospitals within the same facility is behind the drop.

By Cheyenne Hopkins, CQ Staff

December 4, 2006 -- What patients think about the medical care they receive is as important as other measurements of a health care provider's performance, according to speakers at a Monday forum hosted by the Alliance for Health Reform and The Commonwealth Fund.

Ways to measure "patient-centered care" include how much patients are involved in their medical treatment, how well that patient care is coordinated among providers, routine feedback to hospitals, clinical information systems that support high-quality care, and publicly available information on patient-centered care, speakers said.

"We need to make patient-centered care a central part of pay-for-performance," said Karen Davis, president of The Commonwealth Fund.

Davis said that patient-centered care measures should be included in any effort to tie Medicare payments to the quality of care delivered, or pay for performance. She warned it was important to not get too focused on pay-for-performance care and not leave patient-centered care behind.

A move to pay for performance in hospitals began with Medicare tying payment to hospitals' reporting on performance quality, a provision included in the Medicare drug law (PL 108-173). The idea was that payment will ultimately be based on quality performance standards or at least show some improvement on those standards.

In September, the Centers for Medicare and Medicaid Services (CMS) required that patients' experiences with care be added to the hospital measurement requirements. The rule also increased the penalty for not reporting.

Separately, a demonstration project started in 2003 between CMS and Premier Inc., an alliance of not-for-profit hospitals, is testing the merits of "value-based purchasing," which links payment to quality of care. The budget savings law (PL 109-171) signed in February requires CMS to develop a plan to enact value-based purchasing beginning in 2009. An analysis conducted by Premier in September found that costs, complications, and deaths associated with hospital stays could be reduced if hospitals followed certain steps to ensure patients received high-quality care.

There is some evidence that patient-centered care correlates with health outcome, Davis said. A report by the Joint Commission Journal on Quality Improvement found that patients were more likely to suffer fewer complications and death if they had received patient-centered care.

A current measurement of patient satisfaction is the Consumer Assessment of Healthcare Providers and Systems (CAHPS) program, conducted by the Agency for Health Care Research and Quality. It's a public-private initiative to develop standardized surveys of patients' experiences with ambulatory and facility-level care. The program has been adopted by the National Community for Quality Assurance, Medicare, Medicaid, the U.S. Office of Personnel Management, and the Defense Department. Approximately 138 million Americans are in health plans for which CAHPS data are collected.

Charles Darby, co-project officer on the CAHPS survey, said the major challenge is relaying survey results to patients. Next summer, CAHPS will begin the next phase of the survey, which will have a greater focus on the use of the surveys for quality improvement and public reporting.

Individual states also are implementing programs that focus on patients' view of the medical care they received. For example, in 1995 Massachusetts created the Massachusetts Health Quality Partners (MHQP), an independent agency that looks at the quality of health care in Massachusetts through the use of clinical data and the patient experience. In 1998, the agency was the first in the nation to release a statewide hospital survey of patient experiences. Its most recent report on primary care physicians was released in March.

The Massachusetts survey found mixed results from patients on their doctors' performance. Eighty-three percent of practices statewide achieved a score of at least 90 points on communication measure. However, more than one-third of adult patients report that their personal doctor did not always seem to know all the important information about their medical history, and 40 percent of patients said their primary care physician was not always informed or up to date about care they received from specialists.

Massachusetts State Web sites, health plan sites, and several provider organizations have begun providing links to the MHQP reports. Melinda Karp, director of programs for MHQP, said she sees the reports being used later for physician certification, linked by employers, and pay-for-performance programs.

"We've got to get [patients] more interested in the data," Karp said. "That is the next step."

While electronic medical records are a valuable tool but that alone will not drive the improvements needed, she said.

Davis said while patients do not base their health care on performance standards now, patient-centered care can be a "powerful force in the future."

By Mary Agnes Carey, CQ HealthBeat Associate Editor

December 8, 2006 --Anger over congressional failure to address impending funding shortfalls in the State Children's Health Insurance Program (SCHIP) is complicating Senate action on sweeping legislation that includes tax, health care, and trade provisions.

Democrats and Republicans alike are disappointed that House-Senate conferees on the final bill (HR 6111) dropped language included in a Senate Finance Committee package unveiled earlier this week that would have redirected unspent fiscal 2004 and 2005 SCHIP funds to defer shortfalls through June 2007 and taken other steps to expand SCHIP coverage.

Sen. John D. Rockefeller IV, D-W.Va., said last month that unless Congress intervenes, 17 states will run out of federal dollars to fund their SCHIP programs in fiscal 2007. Shortfalls total $920 million and 630,000 children are at risk of losing their health insurance coverage, Rockefeller said.

Democrats' anger is particularly strong and could derail the chamber's consideration of the comprehensive bill, said Kate Leone, senior health counsel for Senate Minority Leader Harry Reid, D-Nev. The chamber is expected to debate the measure late Friday or Saturday, and senators from some Southern states are expected to object to the legislation's trade provisions.

For some Democrats, "we do SCHIP or we don't do anything else," Leone said at a Friday morning panel discussion sponsored by the Alliance for Health Reform and the Kaiser Family Foundation. "I think it's a significant issue. I think it's going to tie us up a little bit," Leone said. She added that other provisions in the measure—including stopping an impending Medicare physician payment cut—also appeal to Democrats.

Senate Democrats are pushing House-Senate negotiators to include SCHIP money in a package that would combine renewals of federal AIDS programs and a bioterrorism law with a restructuring of the National Institutes of Health (NIH). While the Senate has passed the AIDS and bioterrorism measures, House Energy and Commerce Committee Chairman Joe L. Barton, R-Texas, wants the Senate to pass his NIH reauthorization legislation (HR 6164) before the House votes on AIDS and bioterrorism bills.

"A lot of people on our side think NIH reauthorization can wait until next year, but we need SCHIP now," Leone said.

Another panelist at the Alliance forum said Republicans' willingness to fund an expansion of health savings accounts (HSAs) but not SCHIP shortfalls demonstrates the parties' differences on health care.

"They managed to find $1 billion to improve HSAs, which benefit the healthy and wealthy" but would not spend between $3 billion and $4 million to fund the SCHIP shortfalls, said Wendell Primus, health policy adviser to incoming House speaker Nancy Pelosi, D-Calif.

The legislation package includes several provisions to expand the use of HSAs, such as increasing the amount individuals can contribute to the accounts. Rep. Eric Cantor, R-Va., who has sponsored legislation to make those and other changes to HSAs, said in an interview Friday that such steps would help decrease the number of uninsured.

"HSAs will drive consumerism and transparency in health care," Cantor said. "They will bring down costs and help people get more coverage." But he declined to address the SCHIP equity issue raised by Primus. "I think there are two separate issues here," Cantor said.

Primus also said he was doubtful Congress would take action on the SCHIP shortfalls before adjourning for the year and said he hoped President Bush would submit an SCHIP reauthorization proposal in his fiscal 2008 budget proposal. The program is up for reauthorization next year.

Elizabeth Hall, director of health policy for Senate Majority Leader Bill Frist, R-Tenn., predicted that SCHIP reauthorization would stimulate "significant discussion and debate" next year and could be combined with language to address funding shortfalls. Hall also said some of the shortfalls were due to the level of SCHIP coverage in some states for childless adults.