By John Reichard, CQ HealthBeat Editor

August 1, 2007 – Centers for Medicare and Medicaid Services officials trumpeted new payment rules issued Tuesday and Wednesday as helping to ensure the long-term survival of Medicare by increasing the accuracy of payments for inpatient hospital care, rehabilitation treatment, and care in skilled nursing facilities.

The final version of the inpatient payment regulation, perhaps the most closely watched among the three, partially addresses complaints from Capitol Hill about a proposed version that would have reduced payments by 2.4 percent to adjust for expected overbilling by hospitals in response to a new set of payment categories. Instead, the rule would lower payments by 1.2 percent in the year that starts October 1, although CMS hinted that additional such adjustments might be made in future years.

"Substantial evidence supports our conclusion that, absent such an adjustment, aggregate payments for inpatient hospital services would increase significantly under the new system—without any corresponding growth in actual patient severity," said CMS Chief Actuary Richard Foster. "If we didn't make this adjustment, the Medicare Part A Trust would be exhausted an estimated 18 months earlier than previously forecast."

Payments to hospitals for inpatient care will rise a total of $4 billion under the rule, CMS estimated.

The rule also includes provisions to ensure that Medicare no longer pays for the additional costs of certain preventable conditions, including certain infections acquired in the hospital, CMS said. And it expands the list of publicly reported quality measures and reduces Medicare's payment when a hospital replaces a device that is supplied to the hospital at no or reduced cost, the agency added.

A final regulation announced Tuesday for inpatient rehabilitation facilities increases their payments an average of 3.2 percent in the fiscal year starting October 1, CMS said. The rule also states that, as of July 1, 2008, the agency will no longer consider "co-morbidities" in determining whether a facility qualifies for inpatient rehabilitation payments.

The American Hospital Association blasted that decision. "CMS' own analysis shows that in just one year alone, approximately 31,000 patients would no longer qualify for inpatient rehabilitation care without this provision," said AHA Executive Vice President Rick Pollack. "Where does CMS think these patients will go to get the specialized care they need?"

In the third rule, CMS announced that rates paid to skilled nursing facilities will rise by 3.3 percent in fiscal 2008.

By Susannah Crepet, CQ Staff

July 30, 2007 – Retaining children enrolled in Medicaid and the State Children's Health Insurance Program would reduce, by one-third, the number of uninsured children in the United States, according to a new Health Affairs study.

One-third of all children who were uninsured in 2006 had lost SCHIP or Medicaid coverage in the previous year, the study found. Simplifying the renewal process is one way to keep eligible children enrolled, according to the study, which used newly revised data from the U.S. Census Bureau's Current Population Survey.

According to Benjamin Sommers, study author, the instance of eligible but uninsured "dropouts" varies from state to state. For example, dropout rates in Delaware and New York are higher than the rest of the country, suggesting that many eligible children in these states are uninsured but were once enrolled in a program, while dropout rates in Colorado and Utah are lower, suggesting that many eligible children in these states are uninsured as a result of poor program "take-up," he said.

The variation in dropout rates may be because of a few different factors. According to Sommers, "states took steps that intentionally or unintentionally exacerbated dropout." For example, "several states have responded to budget difficulties by making the renewal process more cumbersome or by increasing SCHIP premiums, both of which may exacerbate dropout," Sommers said in a press release.

Sommers also noted "the majority of states have established separate SCHIP programs, rather than using SCHIP funds to expand their existing Medicaid programs." According to the press release, 33 states administered separate programs, as of 2000, and since then, three more states have launched separate programs. "Running a separate [SCHIP] program—a more complex administrative structure—has been linked to significantly higher dropout rates," Sommers said.

The percentage of uninsured children eligible for public coverage who had lost coverage in the previous year rose from 27 percent in 2001 to 42 percent in 2006, according to the study. The problem of dropout from Medicaid and SCHIP is getting worse, especially in response to the new 2006 federal requirement of increased citizenship documentation for Medicaid renewal, which already seems to be causing public coverage to decrease, Sommers said.

According to Sommers, simplifying the Medicaid and SCHIP renewal processes would be a way for policy makers to reduce the dropout rates. In addition, states currently administering separate SCHIP and Medicaid programs might consider integrating the two into a combined program, he said.

By Susannah Crepet, CQ Staff

August 1, 2007 – Less than half of Americans are fully satisfied with their medical care, according to a report released this week by the Agency for Healthcare Research and Quality.

Only 48 percent of Americans age 18 and over who had gone to a doctor or medical clinic within a year of being surveyed rated their health care nine or 10, on scale of zero to 10, according to report.

The findings are based on data from the 2006 National Healthcare Quality Report, which examines the quality of health care across America in four key areas: effectiveness of health care, patient safety, timeliness of care, and focus on the patient.

According to the report, the perception of quality of the health care varied by the individual's race, ethnicity, and the type of insurance held. Among Asians, 31 percent of individuals rated their health care nine or 10, along with 37 percent of American Indians and Alaska Natives. The report found that less than half of white Americans—49 percent—and black Americans—46 percent—gave a nine or 10 rating to their health care. Among Hispanics, 43 percent of individuals reported receiving high quality health care, according to the study.

Other findings include:

• Slightly less than 60 percent of people age 65 and older who have Medicare, with or without additional private or public health insurance, rated their care the highest, compared with 46 percent of privately insured patients and 39 percent of uninsured Americans.
• Less than half of men and women—46 percent and 49 percent, respectively—saw their care as excellent.

By John Reichard, CQ HealthBeat Editor

July 30, 2007 – The latest scoring documents from the Congressional Budget Office put the cost of House provisions expanding the State Children's Health Insurance Program at $47.8 billion over five years, and $159.9 billion over 10 years. The other main element of the House measure (HR 3162)—blocking big Medicare payment cuts to doctors—would cost a surprisingly low $20.1 billion over five years to erase payment cuts in 2008 and 2009, and replace them each year with 0.5 percent payment increases. But the 10-year cost of fixing doctor payments in those two years is five times higher—$101 billion.

It was unclear late Monday afternoon, however, how closely the scoring documents reflected the actual provisions that would be voted on by the House. Sponsors of HR 3162 faced a shortfall of tens of billions of dollars in paying for the legislation over a ten-year period, and it was unclear whether they would make deeper cuts or simply try to pay for the bill over a five-year period.

The analyses of versions of HR 3162—which sponsors call the Children's Health and Protection Act (the Champ Act)—considered last week by the House Ways and Means and Energy and Commerce committees include figures for the years 2008–2012 and 2008–2017. Although the Ways and Means Committee approved its version of the bill, Energy and Commerce Committee Republicans blocked a vote by their panel. Democratic leaders will meld the two proposals into a single bill for floor consideration, which is expected this week.

Although previous indications were that the two-year cost of the doctor payment fix would be considerably more than $20 billion, the 10-year cost suggests that steep cuts would be made several years from now to keep lower the near-term cost, a tactic employed by Republicans last year in moving legislation blocking a scheduled 2007 payment cut to doctors. According to one lobbyist, HR 3162 would have "massive cliffs" in payments to doctors in 2010 and 2011, with payment cuts of 14 percent each year moderated somewhat by an inflation adjustment.

But other measures trimming costs in the Part B side of Medicare that covers physician care also may help explain the lower-than-expected cost of the doctor fix, including cuts in payments for diagnostic imaging and certain Part B drugs. The imaging cuts would save taxpayers $400 million over five years and $1.2 billion over 10 years in the Ways and Means proposal, and $100 million over five years and $400 million over 10 years in the Energy and Commerce plan. Payments for Part B drugs would be cut $1.6 billion over five years and $7.4 billion over 10 years in the Ways and Means proposal, and $700 million and $1.9 billion respectively under the Energy and Commerce approach.

In addition to tobacco tax hikes that include a 45-cents-a-pack increase in the federal tax on cigarettes, much of the cost of the legislation would be funded by cuts to Medicare. Payments in the private health plan side of Medicare, known as Medicare Advantage, would decline by $50.4 billion over five years and $157.1 billion over 10 years by making their payments equal to providers in traditional Medicare. Medicare cuts of all kinds would total $194.8 billion over 10 years, a sum that exceeds cuts to Medicare in the 1997 Balanced Budget Act, another lobbyist noted.

But in addition to covering some five million additional uninsured children over five years and fending off steep doctor payment cuts in 2008 and 2009—the 2008 cut alone would total 10 percent—the legislation reduces a variety of costs for seniors. The bill aims to ease their access to mental health care by reducing out-of-pocket co-insurance costs for mental health treatment. The Ways and Means version of the bill allots $3.3 billion over five years and $8.2 billion over 10 years for that purpose, while the Energy and Commerce version allots somewhat less: $2.2 billion and $4.7 billion respectively.

The Ways and Means proposal also would spend $2.2 billion over five years and $4.7 billion over 10 years to waive the deductible for colorectal screening, while the Energy and Commerce proposal would not change the current deductible. Both versions would spend about $15 billion over five years and around $55 billion over 10 years to pay for "beneficiary improvements," including lower out-of-pocket costs for various Medicare-covered services and less strict eligibility criteria for the comprehensive drug benefit for low-income seniors. Benzodiazepines, heavily used in nursing homes to sedate residents, would gain coverage under the Medicare prescription drug benefit under both committees' proposals, at an added cost to taxpayers of $500 million over five years and $1.2 billion over 10 years.

Both committees' versions would drive up Medicare spending by $500 million over five years and $1.1 billion over 10 years to fund "comparative effectiveness research" to analyze the relative costs of various types of treatments for the same medical condition. But that spending eventually could save tens, if not hundreds of billions of dollars, by lowering the overall growth rate in Medicare spending, some analysts believe.

By John Reichard, CQ HealthBeat Editor

August 1, 2007 – Trustees of the Brookings Institution aim to make major changes in the U.S. health care system and insist that a new center they've funded for that purpose won't just hatch big ideas, but will oversee bold action to put those changes in practice. The man they've picked to run the show may seem like an odd choice for a think tank more identified with Democrats and the left than Republicans and the right: former Centers for Medicare and Medicaid Services Administrator Mark B. McClellan.

The center, named the Engelberg Center for Health Care Reform after Brookings trustee Alfred B. Engelberg, "is one of the timeliest and most ambitious ventures we have ever undertaken at Brookings," said Strobe Talbott, the institution's president. Engelberg, who is funding the center along with fellow trustee Leonard D. Schaeffer, former chairman and CEO of the giant HMO operator Wellpoint Health Networks, said in a Brookings news release last week that he expects the center to make a major contribution to the actual implementation of changes.

"Mark McClellan's proven ability to create and implement important health care reforms, combined with Brookings' long history of thoughtful impact on public policy, has the potential to make a real difference in the steps that are taken to fix our broken health care system," Engelberg said.

McClellan, too, emphasized the importance of going beyond merely offering provocative ideas. "The American public wants action, not just more discussions and more studies," he said. McClellan is identified with revisions in health care that are both much praised, primarily from the right, and much criticized, primarily from the left. He oversaw implementation of the Medicare prescription drug benefit, attacked by Democrats as too confusing because of the profusion of private plans offering the benefit, and praised by Republicans because of the resulting competition they credit with driving premiums below levels Democrats called for in a more government-run system. And McClellan is identified with greater state flexibility in the design of Medicaid programs, which supporters say has allowed the delivery of more efficient care to larger populations, but which critics contend has watered down or denied health care to the needy.

McClellan also held three top health posts in the Bush administration, which Democrats accuse of designing health policies with industry profits in mind at the expense of public protections. Yet during McClellan's time at CMS, he was a driving force in promoting policies acknowledged by both political parties and many academics as fundamental to a more efficient system, such as harnessing the power of health information technology and promoting the measurement of quality. And McClellan's career stops include working at the Treasury Department to design prescription drug coverage during the Clinton administration.

His combination of industry contacts, academic credentials, policy experience, and practical experience—he is a practicing internist—could help make the center a focal point of attempts to develop pragmatic public–private solutions involving a broad cross-section of health care organizations.

Schaeffer, also a driving force behind the center, comes out of a similar mold. A health official in the Carter administration and a highly successful HMO executive, Schaeffer told the academic journal Health Affairs in a 2001 interview, "I'm a believer in government. I worked in government, and I think there's an important role for government, but this issue is much more complex," he said. Schaeffer said the government should help fund coverage for Americans with incomes below 200 percent of the poverty line, but contended that in many instances, affordable private coverage is available to uninsured people with higher incomes and that business and government should be working harder to tell them about it.

He also has set the bar high for the center. "As the focus on health care reform increases, the center will prove to be a powerful force in shaping health policy," Schaeffer said.

The center "will work closely with a broad range of public and private organizations," according to Brookings. The goal will be to implement policy not only at the national level, but also at the state and local level.

One of the center's first goals is getting better value for the health care dollar by working to "achieve widespread use of consistent and valid quality and cost measures." That information should help patients and doctors make better health care decisions, Brookings said.

Another early focus will be on implementing policies based on research at Dartmouth College showing that areas with lower concentrations of medical resources can deliver care that is less costly and of a higher quality.

By Alex Wayne, CQ Staff

August 2 -- The Senate passed a $35 billion expansion of a children's health insurance program Thursday, setting up a difficult negotiation with the House and a probable veto by President Bush.

The House passed a broad bill Aug. 1 that included a larger expansion of the State Children's Health Insurance Program (SCHIP), plus changes to Medicare—notably a cut in spending for managed care plans that participate in the entitlement, plus a reversal of a scheduled cut to physicians' Medicare reimbursements.

The narrower Senate bill passed, 68–31, after a day of defeating mostly Republican attempts to alter the bill.

Both bills would reauthorize SCHIP, which covers about 6 million children whose families are low-income but not poor enough to qualify for Medicaid. The two chambers must now hash out their differences, which are extensive.

Lawmakers from both the House and Senate acknowledge that the House's Medicare provisions, intended to piggyback their way into law on the popularity of children's health insurance, will complicate negotiations.

"I'd be less than direct if I didn't say that we got a lot of help from children,"said Pete Stark, D-Calif., the chairman of the House Ways and Means Health Subcommittee and principal author of the Medicare provisions.

Further, the conferees will negotiate in the shadow of a threatened veto: Bush says he would not sign either bill into law.

Some lawmakers are skeptical that Republicans would sustain a veto. In 2004, at the Republican National Convention, Bush vowed to "lead an aggressive effort to enroll millions of poor children who are eligible but not signed up for the government's health insurance programs."

"He's always supported SCHIP," Rep. Diana DeGette, D-Colo., said of Bush. "For congressional Republicans to be forced to think about sustaining a veto of legislation they've always supported in the past would put them in a very untenable position going into the elections, I think."

The senior Republican on the Senate Finance Committee, Charles E. Grassley of Iowa, said he planned to ask for a meeting with Bush to try to convince him not to veto the bill. "I'm going to convince him we've done the best we can," Grassley said.

Bush has proposed a $5 billion expansion of SCHIP over five years.

Grassley, in a July 31 speech, criticized Bush for not living up to the promise he made at the 2004 convention. But he also issued a warning to House Democrats.

"I'm not going to be able to support a bill that changes significantly from what we have here [in the Senate] with this proposal," he said.

Sen. Trent Lott, R-Miss., acknowledged a veto override was possible, but only if negotiators accept the lower spending total in the Senate bill. "If it goes one iota above what's in [the Senate] bill, we will be able to sustain the veto," Lott said.

Lott also said Senate Republicans would block a formal conference from convening until there was an agreement on spending. "Grassley is going to hold the line pretty strong on this," Lott said.

Coverage Concerns
House Democratic leaders complain that the Senate bill would not allow coverage of as many children as the House bill.

The Senate bill would add 6.1 million children to SCHIP and Medicaid, the Congressional Budget Office (CBO) estimates. The House bill would add 7.5 million.

"We have to cover all of the kids who are eligible for SCHIP in this country and not enrolled, and we have to pay for it," DeGette said. "Any creative suggestions would be welcomed."

Paying for the expansion will prove difficult. Ten Democrats voted against the House bill, in many cases because of its tobacco tax increase of 45 cents per pack of cigarettes, to 84 cents.

The Senate bill includes a 61-cent increase, which would likely drive many more House Democrats to vote against the bill.

Instead of a larger tobacco tax, House Democrats included in their bill a cut in spending for Medicare Advantage, a program in which private managed-care plans provide benefits to seniors in place of the government. The plans are paid about 12 percent more per beneficiary than traditional Medicare costs, according to CBO and the Medicare Payment Advisory Commission, which has recommended reducing the imbalance. The cuts in the House bill would raise $157 billion over 10 years— enough, with the tobacco tax increase, to pay for both the SCHIP expansion and the reversal of the scheduled cut in Medicare reimbursements for doctors.

But Medicare Advantage is championed by Republicans, and the insurance industry is lobbying to preserve it. Several Republicans who voted for the Senate SCHIP bill, notably Gordon H. Smith of Oregon, say they will not vote for a compromise bill that includes Medicare Advantage cuts.

Negotiators also must decide whether to keep the Medicare provisions and SCHIP expansion linked. The American Medical Association is lobbying for the physician payment change. Nearly everyone in Congress seems to agree that the cut must be averted.

"The idea of linking these does make sense, and I haven't heard that the Senate would be unwilling to link them," said Frank Pallone Jr., D-N.J., the chairman of the Energy and Commerce subcommittee on Health.

But that drags Medicare Advantage into the debate, because reversing the physicians' payment cuts is expensive, costing $101 billion over 10 years, according to CBO. Lawmakers have had trouble identifying other programs to cut that would yield that kind of money, and further tax increases are probably not an option.

Drew Armstrong and John Reichard contributed to this story.