By Drew Armstrong, CQ Staff

August 15, 2008 -- House Democrats' hopes to force another vote on expanding a popular children's health insurance program may be stymied by a new cost estimate for the legislation.

According to an Aug. 12 score by the Congressional Budget Office provided to Congressional Quarterly, the latest version of the legislation (HR 3963) would increase deficit spending by $1.6 billion over five years—and therefore violate congressional pay-as-you-go budget rules.

House Democrats had considered forcing a September vote on the bill, as a political move to focus attention on Republicans who have repeatedly voted against Democratic proposals to expand the State Children's Health Insurance Program (SCHIP).

Bush twice vetoed bills late last year that would have expanded SCHIP spending by $35 billion—to about $50 billion over five years. The House twice failed to override him. Democrats say the additional funding is enough to cover about 10 million children.

According to the CBO, the expansion will now cost $37.4 billion over five years, compared with $34.9 billion for an earlier version (HR 976) based on a 2008 start date. The new, higher cost estimate can be blamed on the passage of time, more than anything.

In the budget calculations, 2008 would have been a relatively low-cost year, with expenditures increasing in future years. But the CBO now assumes the expansion would not begin until 2009—a more costly starting point that also translates into higher costs over the life of the legislation. And the bill's revenue-raising provisions would not provide enough money to offset that spending.

The new assessment leaves Democrats in a difficult position. For the bill to be compliant with pay-as-you-go rules, it would have to either cover fewer children or raise more revenue—perhaps by bumping up the tobacco tax increase that it already proposes.

But given how delicate the balance between coverage and costs was in the existing bill, such a move could cause problems.

Child advocates say SCHIP needs to cover at least 3 million more children than the 4.4 million it now serves each month.

"A vote in September that does not provide health coverage to 3–4 million additional kids is nothing more than a watered down version of last year's bill. We would not support that vote," said Christopher Spina, spokesman for First Focus. Spina's group has been pushing to expand the SCHIP program.

It was unclear if House Democrats still plan to hold a vote on the bill in September. Inquiries to the offices of Democratic leaders were not returned as of Friday afternoon.

Alex Wayne contributed to this story.

By Neda Semnani, CQ Staff

August 15, 2008 -- The Centers for Medicare and Medicaid Services (CMS) has announced a pilot program designed to enable Medicare beneficiaries to electronically manage their medical records and treatment plans.

The one-year program, slated to start in Arizona and Utah in January 2009, would allow several thousand beneficiaries to choose an electronic personal health record (PHR) tool that allows patients to collect and maintain up to two years of medical information and health records, including personal identification, insurance information, and medication and dosage information, said a CMS news release.

Unlike physician-maintained medical records and electronic health records (EHRs), PHRs are maintained, accessed, and shared by individuals, not health providers. Though physicians can add information directly into the PHR, only patients can remove it and grant access to their electronic records. The scope of information Medicare beneficiaries can include in the PHR may vary depending on the commercial PHR vendor and the individual's health literacy, the release said.

Tony Trenkle, director of the Offices of E-Health Standards and Services with CMS, acknowledged potential privacy issues that can exist with any electronically managed health records because the owners and administrators of health record databases are not regulated or bound by the Health Insurance Portability and Accountability Act (HIPAA) or its privacy standards. "The PHR vendors have to meet certain criteria to participate, including completing the Data Use Agreement," Trenkle said. Such agreements are meant to ensure that vendors comply with CMS' privacy rules and data release policies.

A House health IT bill (HR 6357) contains provisions to address privacy issues and other health information technology concerns. The bill would extend HIPAA privacy and security standards to all business associates of health care providers, not just the health care providers themselves. The House Energy and Commerce Committee marked up the bill in July.

The program is the third PHR program launched by CMS since 2007. A similar yearlong program kicked off in South Carolina in April 2008 using a single PHR vendor, while a health plan-based pilot began in June 2007. CMS is soliciting vendors for participation in the January pilot, the release.

August 15, 2008 -- The Bush administration's decision to take no action "at this time" to enforce a directive limiting states' ability to expand coverage of uninsured children drew tepid praise from critics Friday, with two Democratic senators calling on the Centers for Medicare and Medicaid Services (CMS) to go farther and stop blocking expansion efforts.

"Maybe CMS is beginning to get it," said Senate Finance Committee Chairman Max Baucus, D-Mont. "This statement seems to show that CMS is finally making the connection between its misguided ... directive and the real kids it could hurt."

But Democratic Sen. John D. Rockefeller IV of West Virginia said "the reality is the Bush administration should not be applauded because nothing has changed. Through this directive they are still committed to denying children's access to health care." Rockefeller added that "the only appropriate response is for CMS to formally rescind the August 17th directive."

Issued almost a year ago, the directive requires states to meet certain standards before they can get federal matching funds for expanding coverage under the State Children's Health Insurance Program (SCHIP). But officials who run SCHIP programs slammed the directive, saying the standards were impossible to meet.

The directive applies to states that either expanded or planned to expand their programs to enroll uninsured children in families with yearly incomes above 250 percent of the federal poverty level. It says that 95 percent of the state's children in families with incomes less than 200 percent of the federal poverty level who are eligible for either SCHIP or Medicaid must be enrolled in those programs before expansion can occur above the 250 percent mark.

CMS said in the directive that it expected affected states to comply within the directive by Aug. 18, 2008 and said it "may pursue corrective action" if states didn't meet the deadline. California officials said this week that they would not be able to comply. CMS spokesman Jeff Nelligan responded Wednesday with a statement saying that federal officials "continue to work" with states affected by the directive to help them achieve compliance but that "at this time we are not taking compliance action."

Ann Clemency Kohler, executive director of the National Association of State Medicaid Directors, said that state officials she talked to Friday say that they have been left in limbo. States that shelved expansion plans this year because of the directive feel they are being treated differently than states that already expanded above 250 percent and now face no penalty, Kohler said.

Cindy Mann, the executive director of the Georgetown University Center for Children and Families, said states that already expanded their SCHIP programs also are left in limbo because of a failure by CMS to formally notify all states what the compliance policy now is and to clarify the statement that compliance action will not be taken "at this time."

Mann asked: "Does that mean they have another week? Another month?" Thousands of children have been denied coverage because the directive already has been enforced to keep planned expansions during the past year from going forward, she added.

Mann added that states that shelved plans should be able now to proceed with those plans.

Nelligan declined to comment when asked whether CMS would formally notify the states what the compliance policy now is under the directive.

Mann said the agency appears unlikely to do so because it has been hit by lawsuits filed by some states saying that the directive, which took the form of a letter sent to state officials, was in effect a regulation that was issued illegally because CMS didn't first publish it and seek public comment.

A letter now to all states modifying the Aug. 17 directive would reignite arguments that CMS was again taking regulatory action, she said. Mann said she expects CMS instead to talk "one by one" to the affected states.

"Most states believe that if CMS wants to make a change they should issue regulations or seek legislation," Kohler said.

But with the fall election fast approaching, some observers doubt that the administration will call further attention to a policy that limits plans to cover uninsured children. Democrats, meanwhile, hope to put that policy in the spotlight by forcing another vote on a measure (HR 3963) sharply increasing SCHIP enrollment above current levels. But the Congressional Budget Office has increased somewhat its estimate of the cost of that legislation, complicating Democratic efforts to bring up the bill again.

By Reed Cooley, CQ Staff

August 14, 2008 -- Community health centers (CHCs) provide significantly more preventive care to Medicaid beneficiaries and the uninsured than do other primary care facilities, which researchers said has saved the publicly funded health centers billions of dollars yearly, according to a new study released Thursday by the George Washington University Medical Centers.

Uninsured patients seeking care at a CHC were 22 percent more likely to receive a Pap smear and 17 percent more likely to have a breast exam than were non-CHC patients without coverage. When Medicaid beneficiaries were added to the mix, CHC patients were 14 percent more likely than non-CHC patients to receive either procedure.

"The findings document that while health centers serve the most vulnerable populations at the greatest risk for poor health outcomes, their patients are getting more preventive care," Julio Bellber said in a press release. Bellber is president and CEO of the RCHN Community Health Foundation, which collaborated with the Geiger Gibson Community Health Center on the report.

Medicaid experts representing the American Hospital Association, a lobby for private providers, could not be reached for comment.

The study did not address the percentage of privately insured patients receiving preventive care measures from CHCs and other health care providers. George Washington University scholar and an author of the report Sarah Rosenbaum said that this was due in part to a lack of data but added that the question of preventive care for the privately insured was worthy of another study.

Privately insured individuals make up 15 percent of CHC patients but only contribute to 5 percent of CHC revenues. Rosenbaum attributed this to more limited reimbursement and lower efficiency in the payment system of private plans. "Private insurers, unlike Medicaid, are much worse payers," she said.

By law CHCs are required to be placed in areas deemed medically underserved and to adjust fees in accordance with patients' ability to pay. There are nearly 7,000 such facilities in the United States, and more than 67 percent of all CHC patients are racial and ethnic minorities, while 27 percent speak a first language other than English and 39 percent are uninsured, according to the report.

The report's authors found that CHCs spent an average of 41 percent or $1,810 less per patient than other primary care providers, a rate that amounted to an estimated total savings of between $10 billion and $18 billion in 2004.

Still, the picture isn't perfect for CHCs, which face severe burdens associated with the increasing health care costs.

A report released Tuesday in the policy journal Health Affairs describes how "safety net" providers including CHCs are "caught in the competitive cross-fire" of the profit-driven health care market. Safety net hospitals have experienced increased market pressures resulting from a spike in uncompensated care as more and more mainstream providers are refusing patients who are unable to pay. This trend has caused some safety net hospitals to adjust marketing techniques in hopes of attracting more privately insured patients and attempting to shed the safety net image, said the report funded by the Robert Wood Johnson Foundation.

Rosenbaum said that in many communities CHCs are able to attract privately insured plans, particularly those designed for lower income individuals, which tend to yield high deductibles.

However, many CHCs suffer from severe underfunding that limits their ability to treat un- and "underinsured" patients, according to Rosenbaum.

"If the government does not radically increase the grants, the pressure is on uninsured patients," she said, adding that this pressure would also be on those with insufficient, high-deductible plans.

The Health Affairs study focused more generally on access to care. "Expansion of insurance coverage is the most direct way to relieve some of the financial pressure on safety-net providers," the report said.

John Reichard contributed to this story.

By John Reichard, CQ HealthBeat Editor

August 12, 2008 -- The free clinics, hospitals, and community health centers that provide care to people without insurance or other financial means are having to respond to a tougher health care marketplace by adopting the strategies of their more well-heeled competitors, in some cases curtailing free care as a result, according to a new study.

These "safety net" providers "are adopting some of the same strategies being used in the private sector to attract higher-paying patients and changing their 'image' as a safety-net provider," said the study, led by researcher Peter Cunningham of the Washington, D.C.–based Center for Studying Health System Change.

Based on interviews in 2007 with hundreds of local doctors, hospital executives, and other health care experts in a dozen randomly selected cities around the United States, the study advised policy makers to expand insurance coverage or increase subsidies to safety net providers as a way of offsetting growing market pressures.

A Tougher Marketplace
Changes in the larger health care marketplace are forcing the change in tactics, said the study, which was posted Tuesday on the Web site of the policy journal Health Affairs. It was funded by the Robert Wood Johnson Foundation, a philanthropic organization.

Providers are trying to outdo each other with investments to build up highly profitable services, a "new medical arms race," the study authors noted. In years past the arms race was more likely to consist of hospitals competing with other by adding more profitable technology-driven services, but now doctors are more likely to be involved in the competition, the study suggested.

In almost all of the communities studied, "we found that physicians are stepping up efforts to build their own diagnostic and ambulatory surgery centers and, therefore, are becoming less dependent on hospitals as their workshops," the study said. Doctors are providing more ancillary services to boost their revenues and at the same time, "the growth of single-specialty medical groups has allowed physician practices the scale needed to offer services that are more profitable."

Hospitals have fought back by creating joint ventures with doctors to hold onto at least some of the revenues they would otherwise lose. They've built new facilities to house specialty services. And they've built new facilities in or relocated to suburban areas "to attract high-income and well-insured patients."

These added capital investments are harder for providers to recoup with price increases because the consolidation of insurers gives payers more power to control rates. That means some hospitals have to "allocate greater portions of their current and future profits to service growing debt, which in turn means that fewer funds are available to support indigent care."

Impact on the Safety Net
As these pressures grow, there are signs that providers are less willing to provide uncompensated care. Outlays for uncompensated care are rising but demand is growing too as the uninsured population swells. The number of uninsured increased 13 percent annually between 1996 and 2005, the study said.

American Hospital Association data show that uncompensated care costs grew 28 percent over the past decade after adjusting for inflation, but uncompensated care costs as a percentage of total hospital expenses dropped almost seven percent. "Hospitals' efforts to limit growth in uncompensated care may be occurring indirectly, by concentrating their expansion activities in more affluent communities and by downsizing or eliminating certain unprofitable services, such as inpatient psychiatric units," the study said.

Most safety net providers reported increasing demand for their services, particularly by patients who were uninsured or covered by Medicaid. The closure of other local facilities, a rise in the number of uninsured, and a growing refusal among other providers to accept uninsured or Medicaid patients were among the factors driving growing demand.

Some safety net providers reported that uninsured patients "were showing up with more serious health problems than in the past, which they interpreted as another indication of worsening access in the community."

"Access to specialty care continues to be the most serious and growing problem in most communities, with mental health, surgical, dental, and vision care frequently cited as the most difficult to obtain."

Safety net providers said they were providing more uncompensated care but most still had balanced budgets or eked out small profits. Safety net hospitals had total profit margins averaging 0.5 percent. Similarly, margins for facilities belonging to the National Association of Public Hospitals grew from 0.7 percent in 2001 to 1.2 percent in 2004. But margins for safety net hospitals were well below the hospital industry average of 4.9 percent in 2005.

New Strategies
In three of the communities studied, major safety net hospitals restricted non-emergency care for patients outside the local area. In one community, "queuing for appointments based on insurance coverage was another tactic being used by the safety net hospital . . . with private insured patients waiting the least amount of time for an appointment and uninsured patients waiting the longest."

In some communities, safety-net providers managed uncompensated care costs more tightly by "more rigorously applying a sliding fee schedule, becoming more aggressive in collecting out-of-pocket payments from uninsured patients, verifying income,, and offering discounts to patients who pay up front."

Some safety-net providers sought to attract more privately insured patients by investing in areas of expertise such as neurological and trauma care treatment services. Centers to treat strokes also were an area of emphasis. In some cases, community health centers marketed their primary care services more aggressively to attract privately insured patients. Among their marketing pitches were that they coordinated care more carefully and offered more advanced health information technology than private doctors' offices.

In some cases, hospitals said they wanted to shed their images as a safety net provider to attract a wider range of patients.

Policy Implications
"Expanding insurance coverage is the most direct way to relieve some of the financial pressure on safety-net providers," the study advised. It also suggested that subsidies such as federal Medicaid payments to "disproportionate share" hospitals could be increased. Payments to those hospitals, which treat an unusually large number of patients with little or no coverage, "have essentially been flat since 1998," the study said.

Regulation also could help. "For example, heightened public concern about the community benefit activities of tax-exempt hospitals has prompted some states to enact laws that require minimum standards of charity care provision by hospitals."

Keeping the balance between the mission of safety net providers to serve the poor and assuring their financial viability "has been tenuous for some time, but is becoming even more so in a marketplace that is becoming more competitive and profit-driven," the study concluded.

By John Reichard, CQ HealthBeat Editor

August 14, 2008 -- In what federal officials call their first test of paying doctors based on the quality and efficiency of their care, Medicare's "Physician Group Practice" demonstration Thursday reported gains in quality and in some cases lowered costs under the revised payment incentives.

The findings "have profound implications for shaping health care reform in America," Don Fisher, president of the American Medical Group Association, said in an afternoon telephone press briefing.

All 10 of the physician groups in the test improved the quality of care to patients with congestive heart failure, coronary artery disease, and diabetes in the second year of the four-year demonstration project, the Centers for Medicare and Medicaid Services (CMS) reported. Four of the 10 groups lowered the costs of care to patients at the same time they improved the quality of treatment.

The four groups are the Dartmouth-Hitchcock Clinic in New Hampshire, the Everett Clinic in Washington, the Marshfield Clinic in Wisconsin, and the University of Michigan Faculty Group Practice.

The 10 groups earned $16.7 million in incentive payments as a result of their performance.

The four "earned $13.8 million in performance payments for improving the quality and cost efficiency of care as their share of a total of $17.4 million" in Medicare savings they generated, CMS said in a news release.

The results show that "by working in collaboration with the physician groups on new and innovative ways to reimburse for high-quality care, we are on the right track to find a better way to pay physicians," said acting CMS administrator Kerry Weems.

Participants emphasized their use of teams including different types of doctors to provide the right care at the right time to chronically ill patients. Barbara Walters, senior medical director of the Dartmouth-Hitchcock Clinic, said her health system treats some of the most medically complicated cases in its area but still generated savings. Walters said the key is using multidisciplinary teams of doctors who coordinate services working off a common electronic health record for patients.

Nurses at the clinic work with high-risk patients using motivational educational programs on disease and personal health care. Regular calls to patients to assure they are getting needed care and to check on their medical conditions are part of the mix. "The patients adore this service," she said. "They like to get calls from the doctor's office just checking on them."

Other techniques used in the demo include having a "visit planner" prepare a "to-do" list for doctors prior to each patient's visit. Doctors get a one-page summary for each patient with key clinical and demographic data, including test dates and results and reminders for needed tests or treatments.

At the Everett Clinic, hospital patients and their caregivers are coached to guide them through complicated care processes in the hospital and when they are discharged.

The Medicare Payment Advisory Commission and other analysts have emphasized the importance of rewarding doctors for quality and efficiency and of encouraging hospitals and doctors to coordinate on more efficient, higher-quality care as a way to improve the value of Medicare spending.

But in many instances providers do not coordinate the way they do in the medical groups in the demo.

Ted Praxel, a physician at the Marshfield Clinic, said "the clinic's success today really hasn't come easily."