By Jane Norman, CQ HealthBeat Associate Editor

August 17, 2009 – Obama administration officials insisted Monday they are not backing away from support of the public option in the health overhaul, despite Health and Human Services Secretary Kathleen Sebelius' comment on a CNN talk show that it's "not the essential element" for providing consumers with choice and competition in insurance plans.

That combined with President Obama's own remarks at a town hall meeting in Grand Junction, Colo., on Saturday brought an avalanche of headlines suggesting that the public option, a key but controversial element of the bill (HR 3200) approved in the House by three committees, is ready to be junked by a White House facing falling poll numbers when it comes to health care.

Democrats, though, quickly lined up to show Obama just how difficult that might be, with defenders ranging all the way up to the speaker of the House.

"A public option is the best option to lower costs, improve the quality of health care, ensure choice and expand coverage," said House Speaker Nancy Pelosi, D-Calif. "The public option brings real reform to lower costs over the 10-year period of the bill."

Obama, in Colorado, mentioned the public option while explaining the benefits the overhaul would have for those who already have insurance coverage, many of whom have been found in polls to be comfortable with the coverage they now have.

"The public option, whether we have it or we don't have it, is not the entirety of health care reform. This is just one sliver of it. One aspect of it," Obama said, as he explained how the overhaul could solve problems with insurers who deny coverage for pre-existing conditions or raise premiums.

White House officials said the remarks by Sebelius and Obama were being taken out of context and misunderstood. "Nothing has changed," said Linda Douglass, spokeswoman for the White House Office of Health Reform, in a statement. "The president has always said that what is essential is that health insurance reform must lower costs, ensure that there are affordable options for all Americans and it must increase choice and competition in the health insurance market. He believes the public option is the best way to achieve those goals."

Whether the White House was really preparing to scrap the public option or just floating a trial balloon in the time-honored Washington fashion, the reaction from Democrats was swift.

Pelosi pointed out that the president stated in March that "the thinking on the public option has been that it gives consumers more choices and it helps keep the private sector honest, because there's some competition out there."

Said Pelosi: "We agree with the president that a public option will keep insurance companies honest and increase competition. There is strong support in the House for a public option. In the House, all three of our bills contain a public option, as does the bill from the Senate HELP Committee."

The co-chairman of the 80-member House Progressive Caucus said he and a majority of caucus members could not support a health care overhaul lacking the public option. Some members of the caucus are more interested in a single-payer system and have only reluctantly accepted the public option as a substitute.

"The public option is central to health care reform," said Rep. Raul M. Grijalva, D-Ariz., the caucus co-chairman.

"Real reform, which lowers costs and ensures all Americans get the quality, affordable health care that they deserve, cannot be accomplished without a robust public," he said in a statement. "As we have stated repeatedly for months now, a majority of the members of the Congressional Progressive Caucus will oppose any health care reform legislation that does not include a robust public option. Our position has not, and will not, change. As co-chair of the Progressive Caucus, I look forward to working with my colleagues to develop comprehensive legislation that allows all Americans to choose the health care plan that's right for them and their families. But I will not support any bill that does not include a public option."

Jacki Schechner, a spokeswoman for Health Care for America Now, which has launched a major national campaign on behalf of change in the health system, said the president has been very clear about the need for a public option and has been consistent in his support. She said that Obama is now trying to broaden the conversation with the public about the overhaul to explain all the changes needed, including for people who already have insurance, and there was "a poor choice of words" in the process.

"I think there's a media narrative that emerged that's not 100 percent accurate," she said. "It's hard for me to tell what exactly their intentions are but I would say that (dropping the public option) would be a very, very bad idea."

Appearing on the morning talk shows on Monday, former Democratic National Committee Chairman Howard Dean said the public option is essential for House approval. "I don't think it can pass without the public option," Dean said on "The Early Show" on CBS. "There are too many people who understand, including the president himself, the public option is absolutely linked to reform."
On the "Today" show on NBC, Dean said that getting rid of it won't assist in gaining a bipartisan bill because Republicans will continue to be opposed no matter what. "I don't think the Republicans are interested and in order to have a bipartisan bill, you've got to have both sides interested," said Dean.

Robert Reich, former secretary of labor in the Clinton administration, said in a post on the liberal Web site Talking Points Memo that the public option is essential. "Without a public, Medicare-like option, health care reform is a band-aid for a system in critical condition," Reich wrote. "There's no way to push private insurers to become more efficient and provide better value to Americans without being forced to compete with a public option. And there's no way to get overall health-care costs down without a public option that has the authority and scale to negotiate lower costs with pharmaceutical companies, doctors, hospitals, and other providers—thereby opening the way for private insurers to do the same."

And John Sweeney, head of the AFL-CIO, said the public option is a must and "we will continue to relay that message forcefully to the Senate and the White House." He said that "unfortunately, the usual suspects opposed to reform are trying to hijack the reform process and attack the public health insurance option because they are afraid of competition and they want to keep gouging working families."

While the public option has seemed to take second place to worry over end-of-life provisions among the crowds protesting the health care overhaul at town hall meetings, it is one of Democrats' toughest political problems as the overhaul moves through the House and Senate. Sen. Charles E. Grassley of Iowa, the top Republican negotiator among the bipartisan "gang of six" engaged in discussions on the Senate Finance Committee, has remained opposed to any insurance plan run by the government, and most other Senate Republicans as well as some Democrats appear against it.

On Sunday, Sen. Kent Conrad, D-N.D., another of the six negotiators, also said the idea will never fly in the Senate and that's why he has pushed the idea of member-run co-operatives instead.

"Well, there are not the votes in the United States Senate for the public option, and that's why I was asked to come up with an alternative," said Conrad on Fox News. "And I want to just make a tweak to what you've referred to as the cooperative plan. You could call it a public cooperative plan. It's not a public plan at all in the sense that government runs it. Government has nothing to do with it. Once it's established, it is run by the members. That's why it is appealing to some on the Republican side."

Insurance companies also have been strongly opposed to the public option, saying it would destroy employer coverage and harm patient care, and didn't seem distressed to hear of its possible demise.

"Unfortunately, the debate about a government-run plan has become a distraction and overshadows the many areas where there is broad consensus," said Robert Zirkelbach of America's Health Insurance Plans. "The same goals can be achieved by enacting insurance market reforms with a personal coverage requirement, expanding the safety net, providing one-stop-shopping for individuals and small businesses, and giving a helping hand to low and moderate income families to purchase coverage."

By Jane Norman, CQ HealthBeat Associate Editor

August 21, 2009 – Bipartisan overhaul negotiators on the Senate Finance Committee agreed via teleconference Thursday night to put an increased emphasis on affordability of care and reducing health costs in any bill they produce.

But there was no indication of a final deal or agreement coming out of the 90-minute discussion, or details on how much more they might try to carve out of legislation pegged in an initial estimate to cost $900 billion over 10 years. The group of six senators did agree to meet again before they return to Washington after Labor Day.

The meeting came after a week in which the future of the only bipartisan overhaul negotiations on Capitol Hill seemed in doubt. Republican Sen. Charles E. Grassley of Iowa, the lead GOP negotiator, said he wants to continue working with Finance Committee Chairman Max Baucus, D-Mont., and other Democrats, but also said he would "absolutely not" vote for a health care bill that had only three or four Republicans backing it, giving a more emphatic tone to comments he's made earlier about seeking wide GOP support.

Baucus issued a statement on the "gang of six" meeting, the first since Aug. 6. The group is made up of Baucus, Grassley and Democrats Kent Conrad of North Dakota and Jeff Bingaman of New Mexico, and Republicans Olympia J. Snowe of Maine and Michael B. Enzi of Wyoming.

"As we travel our states, our work on health care reform continues," said the statement. "Tonight was a productive conversation —we discussed our progress and remain committed to continuing our path toward a bipartisan health care reform bill. Our discussion included an increased emphasis on affordability and reducing costs, and our efforts moving forward will reflect that focus. We have come a long way, will continue our work throughout August and plan to meet again before the Senate returns in September."

The task for the negotiators and their staffs will be how much more can be saved in the legislation without affecting the overall goal of extending affordable coverage to the 47 million uninsured and bending the cost curve of health care spending. Len Nichols, director of the health policy program at the New America Foundation, said at a forum Thursday sponsored by the journal Health Affairs that fully-phased in coverage of all the uninsured likely will cost $150 billion a year

"That is a big number," he said. "The question is, and this is what I think is the single biggest question, are we willing to do what it takes to pay for this? And there are only three buckets. You can increase taxes. You can change the way we currently subsidize health insurance. And you can do something about the way we spend money in Medicare and Medicaid programs."

Nichols said in his view, all three actions are necessary. "I think we've got to be willing to do all these things to be willing to pay the price. I don't think it's too big a price, but it's certainly a significant change," he said.

President Obama discussed the ongoing negotiations in a health care rally Thursday at the Democratic National Committee, where he took questions via e-mail, telephone and Twitter. Obama showered praise on the Republican negotiators "because they're under enormous pressure" but said he has "no control" over what Republicans as a group may decide on as a strategy.

"We don't know yet whether we've got any Republican support," said Obama. "We've got three Republicans who've been working very diligently...to see if we can craft a bipartisan bill coming out of the Senate Finance Committee. I give those three Republicans a lot of credit because they're under enormous pressure not to engage in any kind of negotiations at all. And in the current political climate, they are showing some significant resolve."

"I don't know if in the end they can get there. I hope they can. And we're going to just continue to wait to see if they can get a product done.

"But at some point in the process, there's going to have to be a conclusion that either they can get a bill done or they can't get a bill done. And my commitment to the American people is to get a good product—which will include Republican ideas—but I have no control over what the other side decides is their political strategy. And my obligation to the American people says we're going to get this done one way or another."

By Adriel Bettelheim, CQ Staff

August 20, 2009 – With prospects for a bipartisan agreement increasingly slim, the Obama administration is weighing the merits of splitting a health care overhaul into two pieces.

Under such an approach, the most contentious provisions—including those creating a government-run health plan—would advance under the budget reconciliation procedure, making that bill immune to filibuster in the Senate.

White House Press Secretary Robert Gibbs declined to comment on the possibility on Thursday, saying President Obama remains committed to working with Republicans and Democrats on a comprehensive plan. A bipartisan group of six Senate Finance Committee members involved in ongoing talks is scheduled to hold a conference call Thursday night to evaluate their next steps.

However, individuals familiar with the administration's thinking say the White House is increasingly comfortable with a strategy that could push part of the health care legislation through the Senate without Republican votes.

Under one scenario, Senate Democratic leaders could break off provisions that enjoy significant bipartisan support, including new regulations barring insurers from denying coverage based on pre-existing medical conditions and placing caps on some out-of-pocket expenses. These provisions, which wouldn't require new spending, are believed to be capable of garnering the 60 votes necessary to overcome a filibuster.

Senate leaders could then package more contentious provisions, including those dealing with a public plan to compete with private insurers and tax increases to finance an overhaul, into a separate measure they would try to pass using the reconciliation process. Reconciliation bills can pass the Senate with a simple majority instead of the 60 votes needed to thwart blocking tactics by the opposition.

Splitting the bill probably would be necessary if Democrats opt to use reconciliation in any manner, because under Senate rules, the reconciliation process cannot be used for provisions that don't affect income or spending.

Democrats theoretically control 60 votes in the Senate. But the absence of Edward M. Kennedy, D-Mass., who is battling brain cancer, and the frail health of 91-year-old Robert C. Byrd, D-W.Va., leaves them short of that number as a practical matter. 

A House health care bill (HR 3200) contains a public plan. But centrist party members in both chambers have become increasingly skittish about details of the health care bill and its price tag over the August recess, influenced by sometimes fiery confrontations at town hall meetings and withering attacks from the political right.

Gibbs said it was unlikely Obama would be discussing a split-bill strategy with aides next week while he vacations in Martha's Vineyard, Mass. He said Obama will not participate in Thursday night's conference call among the Senate negotiators.

By John Reichard, CQ HealthBeat Editor

August 17, 2009 -- You mean they haven't adopted it yet?

"Value-based purchasing" in Medicare has been discussed for so many years that it may come as a surprise that the program isn't close to adopting it yet—although it's getting closer.

The term refers to varying Medicare payment levels based on the quality and efficiency of treatment delivered by doctors, hospitals, and health plans.

On Monday, Medicare officials trumpeted the concept yet again, announcing promising results from three demonstration programs and the start of three more such programs: for nursing homes, and for two other projects testing "gainsharing" programs in which hospitals collaborate with doctors to improve the efficiency of care, with the lure of bigger profits if they keep treatment costs down.

But for all the talk about value-based purchasing in the hospital sector and the national angst about controlling health care spending, value-based purchasing ("VBP") wouldn't necessarily be adopted under health overhaul legislation. House Democratic overhaul legislation (HR 3200) does not implement the concept for hospital payments, and while the Senate Finance Committee has expressed strong interest in doing so, it would not begin until fiscal 2013 under a legislative option the panel floated earlier this year.

But House provisions do call for pilot programs creating "accountable care organizations," or "ACOs." The entities would consist of teams of doctors and hospitals receiving a single payment for an episode of treatment. By giving them a single payment, the providers would have an incentive to team up to figure out how to become more efficient, because they'd share any leftover payment after delivering treatment.

"Pilots" are different from "demonstration programs" because the latter can't be adopted through the Medicare program without Congress passing legislation to do so. Pilot programs can be adopted nationally by Medicare officials if the results meet certain criteria. But there is no guarantee about the results of demos becoming law or about the pilots panning out.

Officials at the Center for Medicare and Medicaid Services (CMS) proposed a VBP program to Congress in late 2007 but Congress has yet to legislate one.

"We've given them all this stuff and are continuing to gather information," a CMS source said. "The rest is up to Congress. Implementing VBP, changing the way Medicare pays its claims, would require legislation."

In a news release Monday, CMS said three ongoing demos—a hospital pilot program entering its fifth year, another program involving big group practices, and a third program involving some 560 small physician practices—"continue to provide strong evidence that offering financial incentives for improving or delivering high quality care increases quality and can reduce the growth in Medicare expenditures."

"What we learn from the various demonstrations helps to achieve the administration's goals of paying for high quality and efficient health care in America," said Jonathan Blum, director of the CMS Center for Medicare Management. "Building on these findings, we will aggressively test new demonstration concepts to continue to meet those goals."

The longest-running of the three ongoing demonstrations is the Hospital Quality Incentive Demonstration sponsored by Medicare along with Premier Inc., a national hospital consortium. Conducted in 38 states, it tests the impact of paying hospitals more if they attain certain levels of performance on quality measures or improve sufficiently on their quality scores. CMS says the program is generating widespread quality improvements.

CMS said Monday that participants "raised overall quality by an average of 17 percentage points over 4 years, based on their performance on more than 30 nationally standardized and widely accepted care measures for patients in five clinical areas—heart attack, coronary bypass graft, heart failure, pneumonia, and hip and knee replacements."

Premier recently announced that safety net hospitals and facilities in rural areas also have showed quality gains because of the payment incentives, suggesting that a payment-for-performance system can work not only for well-heeled hospitals that have more resources to improve quality but other hospitals as well.

The second of the ongoing demos is the "Physician Group Practice" (PGP) Demonstration. All ten of the group practices in the program attained benchmark performance levels on at least 28 of 32 measures in year three of the demonstration, CMS said. Two of the groups, Geisinger Clinic in Danville, Pa., and Park Nicollet Health Services in St. Louis Park, Minn., achieved benchmark performance on all 32 levels.

"As a result of their efforts to reduce the growth rate in Medicare expenditures, five physician groups will receive performance payments totaling $25.3 million as part of their share of $32.3 million of savings generated for the Medicare Trust Funds" in year three, CMS said.

The third demonstration is the "Medicare Care Management Performance" demo involving some 560 small and solo physician practices promoting the use of health information technology to improve the quality of care. The average payment per practice is $14,000 but some practices earned as much as $62,500.

In the first of the three new programs, nearly 200 nursing homes in New York, Wisconsin, and Arizona will receive higher payments if they meet certain quality performance standards or improve enough on those standards. The areas to be measured include nurse staffing, outcomes of treatment, avoidable hospitalizations and reducing citations during quality inspections. The program will run three years. The two gainsharing demos involve 14 hospitals collaborating with some 1,000 doctors.

Beth Feldpush, senior associate director for policy at the American Hospital Association, said her group supports building a value- based purchasing system off the current system that pays hospitals for reporting data on a variety of quality measures. AHA is willing to see adoption of such a system if it is budget neutral, she said, but opposes another option floated by the Senate Finance Committee which would return unused funds from a quality payment pool to the U.S. Treasury.

Although concerns have been expressed about the difficulty of less-well-off hospitals improving quality, AHA is willing to see a value-based purchasing program adopted but said it should be closely monitored for "unintended consequences," Feldpush said.
Among the difficulties in adopting a hospital system are the resources and data analyses that would be required at CMS to pay some 6,000 hospitals, a health care lobbyist noted. Some 600 hospitals take part in the current demonstration program with Premier Inc.

By John Reichard, CQ HealthBeat Editor

August 20, 2009 – The Obama administration announced Thursday the availability of $1.2 billion in grant money to establish technical assistance centers and health information networks across the country.

David Blumenthal, the federal health IT coordinator, said the grants are a "critical step forward in laying the groundwork for meaningful use of electronic health records." Medicare payments to providers starting in 2011 will vary with whether or not they make "meaningful use" of the technology, a term that will be defined in a proposed rule to be issued late this year, Blumenthal said in a telephone press briefing Thursday.

An essential step in the process is helping doctors and hospitals pick out systems and learn how to use and maintain them, federal officials say. To that end, officials are offering grants totaling $598 million to create 70 or so "Health Information Technology Regional Extension Centers," which Blumenthal likened to the agricultural extension centers Congress set up early in the 20th Century to improve the efficiency of agriculture.

"The regional extension centers will offer hospitals and clinicians hands-on technical assistance to support meaningful use of certified electronic health record systems," he said.

Plans also call for the creation of a national "Health Information Technology Research Center" to help the regional centers collaborate with each other on best practices for putting systems in place.

Another $564 million in grants will go to states and other entities to create state or regional data exchanges. The aim is to promote the flow of electronic health information throughout the health care system. That will enable "information to follow patients within and across communities, wherever the information is needed to help doctors and patients make the best decisions about medical care," Blumenthal said.

Funds for the grants come from economic stimulus legislation. Blumenthal said other grants are in the works to aid in the development of a health information technology workforce.

By Jane Norman, CQ HealthBeat Associate Editor

August 17, 2009 – A study by the Rand Corp. found that the most promising approach for curbing rising health care costs in Massachusetts is to change the way in which payments are made for health care services, moving to methods such as bundled payments.

Christine E. Eibner, a co-author of the study, said in a presentation Monday that the conclusions could have implications for the national debate over a health overhaul. Some of the concepts implemented in Massachusetts, such as a mandate that all individuals be insured, are included in legislation moving through Congress.

Landmark legislation was approved in 2006 in Massachusetts revamping the health care system. By 2008, just 2.6 percent of Massachusetts residents lacked health insurance, compared with a national average of 15 percent. But continued cost increases threaten the viability of the initiative, says the study, which has been submitted to Massachusetts health officials.

Without policy changes, health care spending in Massachusetts is projected to nearly double to $123 billion by 2020 and finding a way to trim costs is a major issue, the study says. The Massachusetts Division of Health Care Finance and Policy contracted with Rand to suggest paths to savings.

The study says there are no "silver bullets" for cutting spending growth, but there are four top options. They included bundled payments, in which payment is made per patient episode rather than for each service; rate regulation for the many academic medical centers in Massachusetts; elimination of payment for adverse hospital events; and hospital all payer rate setting, in which a regulatory board would set prices. Also promising is adoption of health information technology and expansion of primary care, the study says.