By CQ Staff

September 11, 2006 -- Recent findings from a Government Accountability Office (GAO) report concerning health savings accounts are evidence that such accounts will not decrease health care costs or improve health care quality, Sen. Max Baucus, D-Mont., said Monday.

Health savings accounts, or HSAs, are tax-free accounts funded by individuals or their employer. Funds can be withdrawn without penalty to pay for health care services not covered by high-deductible health plans sold in conjunction with the accounts. Money paid by individuals into the accounts can be deducted from taxable income.

The GAO report, released on Friday, found that while health plans associated with health savings accounts attract enrollees with generally higher incomes—a common complaint about the plans—the data it examined on age differences were "inconclusive."

Critics say that HSAs attract healthy young people and wealthy Americans who use fewer health care services, leaving traditional plans with more costly enrollees who drive up premiums. But proponents say that such plans will help consumers of all ages comparison shop for care based on price and quality, which in turn will help reduce health care costs. GAO, however, did not find that to be the case in questioning members of focus groups.

"Few participants researched the cost of hospital or physician services before obtaining care, although many participants researched the cost of prescription drugs," the report found.

In a statement, Baucus said that while GAO "had found that some Americans do find HSAs useful for both health care and tax purposes," early trends identified in the report "indicate that further expanding HSAs likely will not have the desired effect of lowering health care costs and ensuring quality care for a significant number of people." Baucus added, "Based on GAO's findings right now, I would have to caution against counting on HSAs to advance real health care reform."

President Bush has urged Congress to enact tax breaks he has proposed as part of a plan to expand participation in health savings accounts.

Baucus said he has asked GAO to keep track of HSA trends and report them annually to Congress.

By John Reichard, CQ HealthBeat Editor
September 13, 2006 -- Complications in the process of reconciling state and federal data to establish who qualifies for the higher rates Medicare pays for poor people in managed care plans are costing those plans millions of dollars, industry executives said this week.

At issue are the higher rates the Centers for Medicare and Medicaid Services pays Medicare managed care plans—known as Medicare Advantage plans—for so-called dual eligibles. The term refers to Medicare beneficiaries who also qualify for Medicaid because of their low incomes or disabilities and who typically are sicker and more costly to treat.

"If you are a Medicare Advantage plan, the Centers for Medicare and Medicaid Services is not properly identifying 100 percent of the dual eligibles enrolled in your plan. End of story," an executive in the managed care industry said Monday.

Adjusting CMS payment systems to reflect a Medicare Advantage enrollee's status as a dual eligible involves matching federal data on Medicare eligibility with state data on Medicaid eligibility.

Because of imperfections in that process, health plans in some cases must follow up with state agencies to provide CMS with additional data confirming dual-eligible status. Because state agencies have other priorities or lack resources, obtaining the data can take months or years, the executive said.

Even if data exchange is smooth, shorter lags between the time a dual eligible starts getting care through a Medicare Advantage plan and the time the beneficiary is paid for as a dual eligible occur as a routine part of the enrollment process.

The result: Medicare Advantage plans must seek retroactive payment adjustments from CMS to collect the difference between dual-eligible rates and standard payment rates. But under a policy announced in July 2005, CMS is making it harder to collect those adjustments, the executive said. Plans also complain that the policy is giving them less time to document dual-eligible status.

'Longstanding Issue'
Health plan complaints about the time it takes to establish dual-eligible status for payment purposes go back a number of years. "It's a longstanding issue with the plans," said Candace Schaller, senior vice president for regulatory affairs at America's Health Insurance Plans, the nation's largest health insurance lobby.

But industry complaints have mounted in recent weeks because of enforcement of the July 2005 policy change limiting the time a plan has to convince the agency a patient's care should have been reimbursed at the higher dual-eligible rate. The policy gives plans 45 days to notify the agency that the payment should have been at the higher rate and generally a total of six months to document dual-eligible status to CMS.

Plans say that the deadline shortens the time that they have to provide documentation, adding that prior to the July 2005 policy change the deadline was more open-ended. They complain that in a number of cases they can't provide the proof within that window because of difficulties getting data from the states.

Another complaint is that while the policy still allows plans to receive payment adjustments for services provided within the prior 36 months, it's harder to collect the adjustments because the plan must provide documentation that they were working continuously with the state agencies to try to get the data, the industry executive said. The criteria for documenting those efforts are unclear, the executive added.

$50 Million Shortfall?
The executive estimated that between 0.25 percent and 1 percent of a Medicare Advantage plan's enrollees are dual eligibles but aren't recognized as such by CMS. He estimated that industrywide Medicare Advantage plans are owed more than $50 million because of the data problem.

Plans should have up to 36 months to file the needed confirmatory data and CMS should apply to the dual population a better but still flawed method it has used to identify dual eligibles in switching them from Medicaid to Medicare drug coverage, the executive said.

He added that other data-exchange problems relating to reconciling plan and CMS data on the "risk status" of an enrollee also are costing plans additional millions of dollars. Under the "risk-adjustment" process, CMS pays Medicare Advantage plans more if beneficiaries are sicker and have a higher risk score and less if they are relatively healthy and have a lower risk score.

The conversion of an older computer system for paying Medicare managed care plans also has led to data inaccuracies producing underpayment of plans, he said.

Another industry executive said the problems would not cause plans to shy away from enrolling dual eligibles but would erode already thin profit margins. "At 3 or 4 percent, margins aren't that great to begin with," the executive said.

Both executives expressed frustration that America's Health Insurance Plans, the giant health insurance lobby, hasn't pushed the issue harder. One said AHIP was reluctant to take it up for fear of antagonizing CMS. The other said AHIP and CMS have so much to do with implementing the Part D drug benefit that they haven't elevated the data issue to a top priority.

AHIP President Karen Ignagni said, "plans need to be made whole" for their treatment of dual eligibles and that it's "certainly not the case" that the lobby is not aggressively pursuing the issue with CMS. She said that in the past week alone AHIP has had "several conversations" with CMS on the issue.

"CMS has asked us for concrete examples of plans in this situation and we have a very aggressive outreach program under way to provide this," Ignagni said. Schaller, who said AHIP has been working the issue at CMS for "years," commended the agency for urging states last year to improve the flow of data to CMS to document dual-eligible status, but said the agency needs to clarify what steps plans must take place to establish that they are making good-faith efforts to obtain data from the states.

Schaller said AHIP has been actively engaged in efforts to determine the number of plans currently affected. "It's an important issue even if a small number of plans are affected," she said.

Asked about the issue after a speech on Monday to managed care executives, CMS Administrator Mark B. McClellan said, "definitely the plans are going to get fully reimbursed." But McClellan added that "we do want plans to get us transaction information in time, so we have to set deadlines to make that happen."

CMS spokesman Peter Ashkenaz said agency policy seeks to assure that plans have made concerted efforts to document dual-eligible status. Higher payments shouldn't be made if plans say only years later that an enrollee was a dual eligible without having consistently pursued documentation, he said.

By John Reichard, CQ HealthBeat Editor

September 14, 2006 -- A bill introduced Thursday by Senate Budget Committee Chairman Judd Gregg, R-N.H., would allow employers and insurers access to Medicare claims data to study the cost and quality of health care services. "This bill will provide these groups with an enormous database to refine and improve their studies, and yield ways to improve the quality of the health care they offer at a lower price," according to a Gregg press release.

Dr. Arnold Milstein, a nationally recognized expert on efforts to measure the quality of care, said the bill is a "well-crafted and balanced legislative proposal" that would "bring enormous benefit to patients and their doctors."

Gregg said he is seeking enactment of the measure to improve the efficiency of U.S. health care. Gregg has spoken repeatedly about the need to rein in cost growth in health care spending and in Medicare spending in particular. "The United States spends more on health care as a percentage of the economy than any other industrialized country, and costs continue to rise," he said. "However, there is significant variation in the quality of health care consumers receive."

Backed by auto makers, business lobbies, insurers, and provider groups including the American Hospital Association and the American Nurses Association, the bill would limit the release of the data. Only groups designated as Medicare Quality Reporting Organizations (MQROs) would use the data to carry out studies. HHS would be required to conduct a review of the data to ensure patient privacy.

Employers, providers, consumer groups, labor unions, and others would be empowered to request reports from the MQROs, a bill summary said. The reports would have to be released publicly. The measure also would establish a Quality Advisory Board within HHS to develop quality standards for health care.

"The ability to analyze the full Medicare data set will enable the health care field to have a fuller picture of quality throughout an entire episode of care," said American Hospital Association Executive Vice President Rick Pollack. "It may enable us to identify opportunities to reduce readmissions and other complications of care."

In another measure to rein in health care spending, Rep. Michael C. Burgess, R-Texas, introduced legislation (HR 6053) on Wednesday under which state laws would require insurers to give patients an actual dollar estimate of what the patient must pay for health care items and services.

"Once we understand the actual cost, then we can begin to make effective changes leading to fair physician reimbursement, appropriate patient billing, and better medical services," Burgess said in a Sept. 13 letter urging House colleagues to support the bill.

The measure also calls for research on the types of information consumers find useful in making decisions regarding health care, and on how this information varies by the type of health insurance coverage an individual has. The research also would identify ways that pricing information could be distributed in a timely and simple manner.

The American Hospital Association issued a statement Wednesday supporting the Burgess bill. "With 32 states already requiring hospitals to report pricing information and six more voluntarily doing so, this legislation builds upon the good work the hospital field is already doing," said AHA's Pollack.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

September 12, 2006 -- Medicare beneficiaries will pay $93.50 per month next year for their "Part B" coverage for physician visits and other outpatient services, with higher-income beneficiaries paying a bigger share of the premium costs for the first time in Medicare's history, government officials announced on Tuesday.

The 2007 premiums will be $5, or 5.6 percent, higher than the current $88.50 premium. The premium will be lower than the 11.2 percent increase ($98.40 monthly) the administration predicted in July as part of its midyear review.

Medicare officials said lower-than-expected physician spending growth and additional data on expenditures for Part B spending helped reshape the estimates. Centers for Medicare and Medicaid Services Administrator Mark B. McClellan said the premium increase is the smallest since 2001 and less than half of the dollar increase in the premium for 2006.

But the figure does not cover a potential freeze of a scheduled 5.1 percent cut in Medicare physician payments next January. If Congress were to stop that payment cut, it would increase 2008 Part B premiums by $1.50 per month, McClellan said.

Ron Pollack, executive director of the liberal-leaning advocacy group Families USA, said the increase is bad news for seniors on fixed incomes and for those who may soon fall into the "doughnut hole" gap in the Medicare drug benefit.

After the $250 deductible, the government pays 75 percent of prescription costs but stops paying altogether when a beneficiary's out-of-pocket spending reaches $2,250. Medicare picks up none of the prescriptions costs between $2,250 and $5,100—the "doughnut hole"—in out-of-pocket outlays, after which it pays 95 percent.

"The doughnut hole is going to get larger and other out-of-pocket costs will increase," Pollack said. "And another shoe will drop if the doctors get the fix they have been receiving in the past, and it's likely they will receive it again. . . . Health care is going to take a bigger bite out of their [seniors] incomes than in the past."

An AARP spokeswoman said on Tuesday, "Our bottom line is we want doctors to be paid fairly, but we also want beneficiaries to get value for their dollar. That's why we support a pay-for-performance system in Medicare" that would link the level of payment to the quality of service provided.

McClellan said rapid growth in Part B spending on hospital outpatient services accounts for about one-third of the 2007 premium increase. While outpatient spending growth has continued rapidly, the growth rate spending for physician fee schedule services slowed compared with trends in recent years; although the 2007 projected volume and intensity growth for physician-related services is still high at 5 percent, CMS said in a news release.

Another reason for the Part B premium increase, McClellan said, is to restore Part B contingency reserves. In 2007, $5.50 of the monthly premium will go toward that fund.

Beneficiaries with higher incomes will pay a greater share of their Part B premiums beginning next year. Medicare traditionally pays 75 percent of the premium while beneficiaries cover the remaining 25 percent, but beneficiaries with incomes of $80,000 or higher will pick up more of the tab starting next year, with the highest earners paying 80 percent of the total cost by the end of the three-year transition period.

For example, beneficiaries with annual incomes of between $80,000 and $100,000 ($160,000 to $200,000 for those filing jointly) will pay an additional $12.50 per month, for a total of $106.00. Beneficiaries with incomes greater than $200,000 ($400,000 or more for couples) will pay $68.60 more per month, for a total of $162.10.

McClellan said the higher premiums would be paid by less than one percent of Medicare's approximately 43 million beneficiaries. While McClellan said those beneficiaries who pay higher premiums will still get their money's worth—by paying about $2,000 in premiums but receiving $4,300 in services—9,000 higher-income Medicare beneficiaries are expected to drop out of the program in 2007 and 30,000 are predicted to leave by 2010. He also said that charging higher Medicare Part B premiums to more affluent beneficiaries would raise $20 billion over the next decade.

Separately on Tuesday, two groups who have supported the Medicare drug benefit released surveys that found beneficiaries are pleased with the program.

One survey from the Healthcare Leadership Council found that more than eight out of every 10 Medicare beneficiaries enrolled in the benefit are satisfied with their coverage but that more work needs to be done to educate beneficiaries about what coverage options are available to help cover the doughnut hole coverage gap.

A separate survey from America's Health Insurance Plans, a trade group representing health insurers, found that 81 percent of Medicare beneficiaries enrolled in the benefit said that it covered the drugs they need and 70 percent of seniors would recommend that others sign up for the benefit as well.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

The week of Sept. 18 may be make-or-break time for physicians seeking to get Medicare payment legislation through Congress before the midterm elections. Without action, Medicare payment cuts of 5.1 percent are scheduled for Jan. 1.

"I think it has to take shape by Tuesday or Wednesday or it moves to the lame duck" session, said one source close to the negotiations. "It's got to be moving by midweek," said another.

Lawmakers have urged their leaders to move quickly on passing legislation that would increase Medicare physician payments for 2007. In the House, a bipartisan group of more than 260 members sent a letter Sept. 11 asking Speaker J. Dennis Hastert, R-Ill., and Minority Leader Nancy Pelosi, D-Calif., to take action this month to avert the impending cut.

"At a minimum, we must provide a modest increase for physicians as they received a zero increase this year and are being encouraged to adopt health information technology," the House members wrote. In July, 80 senators sent a letter to Republican and Democratic leaders in that chamber, urging them to take action to stop the scheduled reductions.

House and Senate committees with jurisdiction over Medicare are drafting measures that are likely to link any physician payment increases to reporting requirements. Industry and Capitol Hill sources say the situation is highly fluid and subject to change. "I think the general attitude right now is people are trying to keep their powder dry and see how it plays out today and throughout the weekend," a physician source said Friday.

Physicians did not favorably receive a package from House Ways and Means Committee Chairman Bill Thomas that would freeze Medicare physician payments for 2007 at 2006 rates, but would increase payments by 2.8 percent in mid-2007 for doctors participating in a Centers for Medicare and Medicaid Services program to report quality data. Thomas' proposal would cut payments to doctors not participating in the program by at least 5 percent in 2008.

The American Medical Association and other physicians' groups prefer a 2.0 percent update for all physicians, with additional payment increase of 0.8 percent for reporting quality data, the physician sources said.

Some physicians say doctors in small practices may not have the computer systems in place to report quality data and should not be penalized. "Not everyone can report quality data and they shouldn't have to take a freeze," said Larry Fields, president of the American Academy of Family Physicians.

A House Ways and Means Committee spokesman declined to comment Friday on the negotiations.

House Energy and Commerce Chairman Joe L. Barton, R-Texas, is also drafting a package that sources said calls for a three-year freeze in payment cuts, with a pilot quality reporting program in 2007. In 2008–09, physicians could receive payment updates of 2.5 percent each year for quality reporting.

The measure is also likely to have a "balanced billing" provision that would allow physicians to charge higher-income patients (individuals with incomes of $80,000 or more and couples with incomes of $160,000 or more) more for their care. The provision is similar to one contained in physician payment legislation (HR 5866) sponsored by Rep. Michael C. Burgess R-Texas. The Barton bill's pricetag, sources said, could be as high as $30 billion over five years.

Energy and Commerce Committee spokesman Kevin Schweers said Medicare physician payment legislation "remains a priority" and that staff is working on the issue.

In the Senate, Finance committee aides are working on physician payment legislation but no details were available Friday, said spokeswoman Jill Kozeny.

If the payment issue does slip until November, physicians' chances to get the deal they prefer—an increase in payments for all physicians who participate in Medicare with extra financial incentives if they participate in a quality reporting program—will greatly diminish.
"In November, you never know the attitude or general approach of the members when they come back," said one physician source.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

September 14, 2006 -- Survey findings released Thursday by a group focused on educating Medicare beneficiaries about the program's prescription drug benefit highlighted successes and potential trouble spots ahead as both the government and seniors gear up for the 2007 enrollment season.

The poll, released by Medicare Rx Education Network, found that four out of five seniors enrolled in a stand-alone or Medicare Advantage prescription drug plan were satisfied with their coverage and 73 percent said the plans cover the medications they need. Nearly a third said they no longer need to skip or reduce their medications.

But a quarter of those surveyed said the Medicare drug program had not helped them reduce drug costs and 29 percent expressed frustration with the program. Nearly half of those enrolled in drug coverage were unaware of the fact that some plans have a gap—or "doughnut hole"—in coverage that requires beneficiaries to pay all of their drug costs until catastrophic coverage kicks in. Eight in 10 of those surveyed said they were unaware they could sign up for a plan that covered that gap.

At a news conference to announce the results, Centers for Medicare and Medicaid Services Administrator Mark B. McClellan said some respondents who said they are not saving money with the drug benefit are individuals who may not have drug costs now but have purchased a plan as insurance against potentially higher drug bills in the years to come. "It's a good way to protect themselves in the future," McClellan said. "What they get is peace of mind."

In addition, McClellan said that "dual eligibles," beneficiaries who qualify for both Medicare and Medicaid but now receive their drug coverage in the Medicare drug benefit, may not be saving on their drug costs but are getting access to drugs. "We're watching that population very closely," he said.

Former Sen. John B. Breaux, D-La. (1987–2005), who helped write the Medicare drug bill and is honorary chairman of the Medicare Rx Education Network, said estimates that just 8 percent of Medicare beneficiaries were projected to fall into the "doughnut hole" were far fewer than previously thought, and that overall the Medicare drug program was being received favorably by beneficiaries.

"Anytime you get anywhere near 80 percent approval rating for a government program you've hit a home run," Breaux said. He added that some of the survey's findings show that beneficiaries need more information about the types of coverage available to them.

"Our job, of course, is never complete until 100 percent are satisfied," he said. "Giving people more choices makes it more complicated."

Medicare beneficiaries who plan to sign up for the benefit or switch plans if they are already enrolled will have six weeks, between Nov. 15 and Dec. 31, to take that step. CMS, however, is encouraging beneficiaries to sign up before Dec. 8 to help smooth any potential problems with enrollment or delivery of benefits.

A coalition of 41 advocacy organizations asked Senate and House leaders Wednesday to pass legislation before adjournment that would waive the late enrollment penalty for beneficiaries. The penalty, which would be 7 percent for beneficiaries who did not enroll by the May 15 deadline, will increase over time, the groups wrote. They also said it is harsher than the late enrollment penalty beneficiaries face for Medicare Part B, which does not apply for the first 12 months after the initial enrollment period.

Organizations signing on to the letter include the National Council on Aging, the Medicare Rights Center, and Families USA.