By John Reichard, CQ HealthBeat Editor

May 7, 2009 – The fiscal 2010 budget proposal released Thursday by the Obama administration recaps the Medicare cuts it proposed earlier this year to pay for a health overhaul, but offers new details on efforts to fight fraud and how it might reduce the cost of legislation erasing deep scheduled Medicare cuts in payments to doctors.

The budget would add $125 million in funding next year to the nearly $1.5 billion now spent on the "HCFAC" program, established under 1996 legislation creating a joint effort by HHS and the Justice Department to crack down on health care fraud. A total of $311 million next year in discretionary funding for the Health Care and Fraud and Abuse Control Program would be allocated as follows: $220 million for Medicare; $31 million for Medicaid; $30 million for the Department of Justice; and $30 million for the HHS Office of the Inspector General.

Part of the Medicare money would be used to go after fraud in the private plan side of Medicare, the Medicare Advantage side offering private health plans and the Medicare Part D side offering coverage through private prescription drug plans.

Adding to administration headaches paying for a health overhaul is the cost of erasing deep cuts scheduled in doctor payments under Medicare's current payment formula, including a 21 percent cut next year. Budget documents show that preventing cuts and keeping doctor payments flat over the next ten years would cost a whopping $311 billion, a huge increase in the tab for the health overhaul package if it includes the doctor payment fix.

The HHS "Budget in Brief" document notes that "as part of health care reform, the administration would support comprehensive, but fiscally responsible, reforms to this payment formula. Consistent with this goal, the administration will explore the breadth of options available under current authority to facilitate such reforms including an assessment, both substantively and legally, of whether physician administered drugs should be covered under the payment formula." According to a Centers for Medicare and Medicaid Services (CMS) estimate, not including the cost of those drugs in assessing adherence to physician spending targets would lower the 10-year legislative cost of a freeze from $311 billion to $181.5 billion. But the $129.6 billion reduction in how much the legislation would cost Congress would increase the federal deficit by that amount.

Obama is proposing Medicare changes that would contribute $288 billion over 10 years to a reserve fund to help pay for an overhaul of the nation's health care system. Revisions include varying payment to hospitals by the quality of care they provide. An incentive payment "would link a portion of base operating payments to performance on specified quality measures," the HHS budget summary notes. "The portion of payments linked to performance would be 5 percent in 2011, phasing to 15 percent by 2015."

"Payments not earned back would be split equally between a pool to fund additional hospital quality incentive payments and the Medicare Trust Fund." CMS estimates savings of $12 billion over ten years as a result. Changes to encourage hospitals to improve quality of care to prevent readmissions would save $8.4 billion over that period.

Another $177 billion would be saved through a competitive bidding program to base payments to Medicare Advantage plans on the average of their bids to serve the Medicare population. A total of $16 billion would be saved via payment "bundles" combining hospital and post-hospital care in skilled nursing facilities or other forms of post-acute care. About $250 million would be saved by contracting with "radiology benefit managers" to "ensure appropriate payments for imaging services." A total of $34 billion would be saved by home health payment changes including freezing payments in fiscal 2010 and "rebasing payments in fiscal year 2011."

Establishing a mechanism at the Food and Drug Administration easing approval of cheaper "follow-on" versions of biotech drugs would save $6 billion, and improved screening for payment errors and other measures to improve payment accuracy would save $2.1 billion. Reallocating the "Medicare Improvement Fund" toward a health overhaul would save $23 billion. Charging affluent seniors higher premiums for Medicare drug coverage would save $8 billion. In addition, Medicare would save $27 billion over 10 years through administrative changes such as adjustments to payments to Medicare Advantage plans to reflect the way they code patients; adjustments in payments to prescription drug plans based on the way they code patients; and changes in the way skilled nursing facility patients are classified. The skilled nursing change by itself would save $18 billion.

By Jane Norman and John Reichard, CQ HealthBeat

May 5, 2009 – Republicans on the Senate Finance Committee expressed deep skepticism Tuesday about a public plan option as part of the health care overhaul, pressing witnesses at a roundtable hearing on how such a plan would work without holding an advantage over competing private insurance plans.

Committee Chairman Max Baucus, D-Mont., has been careful to include Republicans as he seeks sweeping health care changes in a country in which one in three Americans went without insurance for some period during 2007 and 2008 and a plummeting economy has deepened the problem, he noted. There weren't any fireworks, but senators did not appear to be sharing much common ground yet.

"It's interesting how this public plan is now called the consumer-oriented plan," said Sen. John Cornyn, R-Texas. "I think it's more descriptive to say it's a Washington-directed unfair competition plan, because the government isn't a fair competitor. The government price fixes, tells how much it is going to pay, take it or leave it. That's the way it is now with Medicare and Medicaid."

But New York Sen. Charles E. Schumer, a Democrat, took exception to arguments that a government-run insurance exchange with a government-run insurance option on the menu would have an unfair advantage because the government would both compete in the exchange and set the rules of competition.

"Some of you said you don't want the public plan to have an unfair advantage — I'd agree — but just as bad as a public plan with an unfair advantage is a proposal with no public plan at all," said Schumer. People "have problems with the government sometimes but they have a lot more problems with private insurance companies. And the bottom line is you need somebody who is not a private insurance company to be in the mix. And there are many of us who feel very strongly about that."

The beginning of the hearing was delayed by about four minutes when a series of eight protestors stood up and, one by one, spoke out in favor of single-payer health plans like Canada's to cover the nation's 46 million uninsured, an idea endorsed by some House Democrats. "We need to have single payer on the table," said one man, shouting. "I have friends who have died who don't have health care, whose health care didn't withstand their personal health emergencies."

Each protestor was hauled out of the packed Dirksen Senate Office Building hearing room by Capitol Police. Baucus urged the remaining audience members to listen to the discussion calmly. "I deeply, deeply respect the views of all the members of the audience," he said, adding that single-payer or a public plan is "a view many people have — it is a view which I respect — there are other approaches to health care reform that I also respect." A coalition of groups including Physicians for a National Health Care Program and the Prosperity Agenda later took responsibility for the protest.

Sen. Pat Roberts, R-Kan., known for his dry humor, said the protestors "undoubtedly were from the House — that's just the way they are. I'd mark 'em down as undecided."

Baucus gathered 15 experts to discuss with committee members the issue of coverage in an overhaul, including business, labor, insurers and think tanks. The meeting was the second roundtable for the committee after a first that looked at delivery options. "Now we're moving on to tougher issues," said Sen. Charles E. Grassley, R-Iowa, who along with other Republicans such as Sen. Orrin G. Hatch of Utah, wondered how the cost could be borne by states and the federal government if Medicaid is extended to more people, one idea under scrutiny.

Hatch said that expansion of Medicaid to those low-income people at living at 100 percent of poverty would cost $500 billion to $700 billion over 10 years for the federal government. An expansion of Medicare to younger retirees 55 and up might prompt bankruptcy for the Part A Medicare hospital benefit by 2015, said Hatch. "To me, a combination of Medicaid, Medicare and SCHIP (State Children's Health Insurance Program) expansion has much the same effect as a public plan," he said.

But Ron Pollack, executive director of Families USA, said something has to be done to upgrade Medicaid because so many people lacking insurance are very poor yet still can't qualify now for the program. "If we are going to be serious about covering people who need care the most and who are least able to get it, we are going to have to upgrade Medicaid and create a national floor," said Pollack, "so that nobody can fall through."

Hatch said he would prefer subsidies for low-income people to obtain private coverage. "We can have a lot of flexibility to do this coverage in other ways," he said.

More doubt about a new public plan came from Roberts, who said health care access already is a problem in his largely rural state. "I really worry about the availability of health care providers, as we have seen today that we're rationing health care," said Roberts. "And here we're talking about superimposing this big plan over the current plan. Not that I don't want reform."

Grassley observed that some advocates of a government-run public plan say it's needed to keep private plans honest, and asked the panelists if the same effect would be achieved by reforming ratings and requiring insurers to take all applicants. Stuart Butler, vice president for domestic and economic policy studies at the Heritage Foundation, said it would; the issue is whether a level playing field can be set up with a government plan included, he said. "The public plan will be your plan. Everybody will see it that way. So I think it's impossible to imagine a true level playing field in that circumstance."

In the Federal Employee Health Benefits (FEHB) system, which covers 10 million workers, the same questions arise but broad rules are set along with negotiations on a national basis to ensure benefits are available everywhere across the nation, Butler said. "You don't need a public plan in the FEHB and I don't think you need it generally," he said.

Karen Ignagni, president and CEO of America's Health Insurance Plans, said the answer to Grassley depends on the desire for government regulation, pointing out that her group is advocating additional regulations that would change the marketplace and even out problems for consumers. "We are ready to be accountable for those rules," she said.

Building on the employer-based system with improvements such as tax credits, insurance market reforms and personal responsibility for obtaining coverage was voiced as the preference of the Blue Cross and Blue Shield Association, which includes 39 community-based companies that provide insurance for 100 million people.

Scott Serota, president and CEO of the association, said if the government pays providers the same rates as under Medicare and Medicaid and tries to expand coverage at the same time to millions of people, "it would have a tremendously, potentially devastating effect on access."

But Len Nichols, director of the health policy program at the New America Foundation, said, "I think in fact you could design a public plan that could be competitive" and 30 states have been able to do that for their employees with their own self-insured plans competing with private products.

Nichols, a health economist, said in his prepared testimony that many Americans distrust private health plans and a new public plan would assure them their plan is accountable to consumers and not profits. A public plan also would serve a benchmark role. But Nichols said all insurance market rules would have to apply to all plans equally, the authority managing the insurance marketplace couldn't be the same as the public health insurance plan, and the plan couldn't leverage Medicare to claim an unfair advantage.

Said Schumer: "I don't think the public plan should have an unfair advantage but it would be giving all of you in the insurance industry an unfair advantage not to have a public plan, particularly given the fact that in many states we don't have any real competition" among insurers.

"So I'd like to focus on trying to make the public plan fair . . . so it's a fair competitor as opposed to having an unfair competitive advantage."

To that end, Schumer proposed a "Plan USA," which he described as a "consumer-driven public health plan." He said it would operate under the same rules as private plans and would be subject to rules requiring the issuance of insurance policies regardless of health status and could not charge rates based on health status.

The plan could not be run by the same entity that runs the insurance exchange. The plan would have to be self-sustaining financially, and government could not use denial of participation in Medicare as a way to force providers to accept public plan enrollees. The public plan would have to meet the same minimum standards for plan benefits, and subsidies to buy coverage could not be greater for public plan enrollees, Schumer said.

Pollack said he agreed with much of the Schumer proposal but said certain advantages enjoyed by the public plan should not be dropped. For example, unlike private insurers, the plan would not face the same costs for marketing and for sales agent fees and would not have to charge more to make a profit. And it would likely enjoy larger enrollment than any single private plan and should enjoy the greater economies of scale it has as a result, Pollack said.

However, Butler said he wondered if the criteria Schumer said the public plan would have to meet are realistic. He noted for example that Schumer would require the entity running the plan to be separate from that controlling the insurance exchange, but ultimately Congress would control both.

Members also discussed how to make more choices available in coverage, again citing the FEHB. Sen. Ron Wyden, D-Ore., said that "people want coverage like their members of Congress have — that's what you hear again and again and again." The key is individual choice among plans, said Wyden, and many Americans don't have a choice of plan because only one is offered by employers.

Sen. John Kerry, D-Mass., said he is moving ahead already with legislation that would do away with gender rating in insurance, with women charged higher premiums than men for identical coverage. "It seems to me that's insurance discrimination," he said. Ignagni told him "we believe gender should not be the subject of ratings" and her association has recommended an end to it.

A third roundtable meeting on May 12 will focus on financing.

By John Reichard, CQ HealthBeat Editor

May 6, 2009 – HHS Secretary Kathleen Sebelius offered a relaxed defense of — what else? — the "public plan" option in her debut Wednesday before the House Ways and Means Committee, portraying it as par for the course in many states around the country, not some exotic new structure that would gobble up the private insurance market.

It seems unlikely that any Republicans are going to be brought around to the contentious concept as Congress debates an overhaul of the health care system, but if anyone can make the sale it may be the former Kansas governor and state insurance commissioner, whose straightforward Midwestern manner may be an effective Obama administration antidote to fears that the public plan would take the nation on a scary foray deep into socialist health care.

Asked by Committee Chairman Charles B. Rangel, D-N.Y., why the public plan — an ambiguous term but one that many define as a government-run insurance plan offered in a government-sponsored insurance exchange along with private insurance plans — is important to improving quality and lowering costs, Sebelius tailored her argument to the virtues of marketplace competition.

Sebelius said "what I'm a believer in . . . is that competition is a very healthy component of any market situation. I think that competition helps promote innovation, helps promote best practices and also can help to lower costs.

"In many parts of the country, including in my home state of Kansas, there are a lot of areas in the state where there aren't choices of private carriers . . . which is why in our design of the state employee health insurance plan we created a . . . side-by-side public and private option."

About 30 states have similar designs, Sebelius said, adding that public and private insurance options exist side by side in State Children's Health Insurance programs.

"I know many states in their design of the children's health insurance plan, the public plan is a side-by-side option with private carriers," she said. "The underlying issues are, "What are the rules? What are the actuarial issues going into the design of the plan and is there a level playing field?' " She also emphasized that private plans enjoy unfair competitive advantages in that they've been able to "cherry pick," enrolling low-cost customers while avoiding those needing costly care.

Sebelius shared a Midwestern moment with Rep. David Camp, the top Republican on the committee who represents a district in Michigan that includes the Leelanau Peninsula, a popular summer vacation area where Sebelius owns property. Camp noted the Sebelius connection to the Leelaunau in his opening statement and Sebelius joshed back that she pays too many property taxes in Camp's district.

Friendly talk aside, Rep. Paul Ryan of Wisconsin — whom Rangel sweet-talked by introducing him as a rising star in the Republican Party — wound up for a hard-hitting question by noting that despite nice rhetoric by the Obama administration about Americans being able to keep their current coverage, a public plan paying relatively low rates might cause providers to charge private plans so much that over 100 million Americans could lose their current coverage.

Ryan layered on more questions in his remarks, repeatedly questioning how the administration would fund a $1.2 trillion overhaul plan that offers no suggestions for half of the funding and includes problematic provisions to pay for the other half.

Before observers could get a sense of how well Sebelius would parry the energetic questioning of the hard-charging Ryan, Rangel informed Ryan that he unfortunately had used up all his time asking his questions and had left no time for Sebelius to answer.

Ryan grinned without complaint, fireworks forestalled by an agreement that the committee's many questioners would keep their questions limited to allow everyone on the panel to inquire in the two hours Sebelius was slotted to appear.

Rangel pledged that he would meet with Republicans privately next week in a search for common ground. "We're having a very informal meeting to determine if there is anything at all we can do" to get GOP support for a Democratic overhaul plan, he told a knot of reporters who clustered at the podium after the hearing.

Reporters aimed to pry loose from Rangel some details about how House Democrats aim to overhaul the health care system, including how he might pay for revisions. Rangel said the structure of the public plan would depend on how the Congressional Budget Office (CBO) scores its cost. Asked whether he hopes to obtain CBO scoring of savings from the public plan, Rangel said "I'm hoping that I will, but not enough that I need." When one reporter poked a microphone in front of Rangel after asking if the chairman would consider taxing "high end" health insurance benefits to pay for an overhaul, a smiling Rangel yelled into the microphone, "NO WAY!"

Rangel was then asked whether he might propose cutting hospital payments to pay for the overhaul. "I would not want to get involved in cutting hospital payments, no, no," he said. But Rangel and other Democrats may have no choice but to cut provider payments widely among other painful choices they might have to make if a dramatic coverage expansion is to be funded.

By John Reichard, CQ HealthBeat Editor

May 4, 2009 – Although Congress has been holding plenty of hearings on overhauling the nation's health care system, the timetable for action on the issue outlined by key lawmakers has left little time if any for public hearings on whatever plan they develop. But House Energy and Commerce Committee Chairman Henry A. Waxman told a health care conference Monday that he does intend to hold hearings on the approach being developed by three committees in his legislative chamber.

Those hearings may be on something that falls somewhat short of a final House bill, however.

Waxman began his remarks to a Washington, D.C. conference sponsored by the consulting firm Avalere Health by saying, "I want to make a few predictions: one, that the House of Representatives will pass a health reform bill by the end of July; secondly, that before this year is up the Congress will pass a bill, and thirdly the president will sign it."

Waxman said the staff of the three committees will develop a proposal to create a common starting point. He referred to the proposal as a "framework" from which each of the committees might in some respects move in its own direction. The three panels are the Energy and Commerce Committee, the Ways and Means Committee and the Education and Labor Committee.

"And next month or so, that proposal will be made public," Waxman said. "Then, after that, Chairman Pallone and I intend to hold hearings to get the views of the stakeholders. We intend to follow a transparent markup process." New Jersey Democrat Frank Pallone, Jr. is the chairman of the House Energy and Commerce Health Subcommittee.

After each committee acts on the common proposal, differences might be resolved by House leaders before the measure is brought to the floor, or through the amendment process once the bill is on the floor, Waxman said. Asked after his speech whether the hearings would be on a specific bill or on the common framework, Waxman said a bill but "with various decisions that are yet to be made by our committee."

Although questions are growing about how universal coverage would be funded — cuts in Medicare hospital inpatient payments proposed by the Centers for Medicare and Medicaid Services late last week raise questions about what room there would be to cut hospital payments to fund universal coverage — Waxman said, "This whole health reform will result in all Americans getting covered."

And he gave no signs of retreating on a "public plan" alternative to private coverage of the uninsured. Some analysts have wondered whether Democrats might consider as a sufficient alternative a guarantee that a government-run plan for the uninsured would be available in parts of the country where private coverage options do not exist.

Waxman, however, rejected that approach when questioned by a reporter. "I think we need a public option certainly in the areas where there's no private option, but we need it elsewhere as well," he said. "We want a public option that can be available throughout the country. It'll be different from one place to another, but it will be one of the options."

Waxman suggested that critics have exaggerated fears of the public option, saying it isn't meant to ultimately bring an end to private coverage but merely to provide "creative tension" between public and private plans that will foster innovation and efficiency. "A public plan does not mean government socialized medicine that we see in other countries," he asserted. It does not aim to put the private health insurance industry out of business. "We want competition but we don't want anyone to win the race outright," he said.
Waxman noted that Pennsylvania Sen. Arlen Specter, a newcomer to the Democratic party, said over the weekend that he opposes the public plan concept. But once House bill language is written proposing the public plan alternative "people will say this is no great threat to anyone," Waxman predicted.

By Melissa Attias, CQ Staff

May 8, 2009 – Following reports released by the Department of Health and Human Services indicating that patient safety measures have worsened, HHS Secretary Kathleen Sebelius this week challenged hospitals to reduce the number of health care associated infections (HAIs) in their facilities, according to an HHS news release.

HAIs drive up the cost of health care in the United States by up to $20 billion each year and are among the top ten leading causes of death, HHS said.

Sebelius called on hospitals to reduce the number of Central Line Associated Blood Stream Infections in intensive care units by 75 percent over the next three years, the release said. HHS also plans to make $50 million in grants available for states to fight HAIs using funds from the economic stimulus law, the release said.

"Healthcare-associated infections can make illnesses worse, further debilitate patients who are already struggling and sometimes lead to death," Sebelius said in the release. "Through the funding provided by the Recovery Act, we can help prevent these infections and improve the quality of care for all patients."

Yet according to the 2008 National Healthcare Quality Report published annually by the Agency for Healthcare Research and Quality (AHRQ), patient safety in the United States is not improving. The 2008 report shows nearly a 1 percent decline in patient safety since 2007.

In addition, the report showed that improvements in health care quality are unevenly spread across the difference settings of patient care. Although care delivered in hospitals has increased approximately 3 percent per year, for example, the report said that care in ambulatory settings only improved at a rate slightly more than 1 percent.

The amount of patients receiving needed care also varied widely across medical conditions, according to the report. Patients who are hospitalized with a heart attack receive 95 percent of recommended services, for example, while only 15 percent of patients on dialysis are registered on a kidney transplant waiting list, the report said.

Meanwhile, the 2008 National Healthcare Disparities Report also published by AHRQ showed that at least 60 percent of measures of quality of care are not improving for Blacks, Asians, American Indians/Alaska Natives, Hispanics and poor people. The proportion of new AIDS cases was 9.4 times as high for Blacks as for Whites and the rate of new AIDS cases was more than three times as high for Hispanics as for non-Hispanic Whites, the report said.

In addition, Asians were more likely than Whites to not get care for illness or injury as soon as they wanted and poor adults were more than twice as likely not to get timely care, the report said. The disparities report also showed that the percentage of children whose parents reported having trouble communicating with health care providers was almost four times as high for poor children as for high-income children. American Indian/Alaska Native women were also twice as likely to lack prenatal care as White women, the report added, while American Indian/Alaska Native adults were less likely than whites to receive colorectal cancer screening.

"Today's reports show why we can't wait to enact comprehensive health reform," Sebelius said in the release. "The status quo is unsustainable and we cannot allow millions of Americans to continue to go without the care they need and deserve."

By John Reichard, CQ HealthBeat Editor

May 8, 2009 – The new appointee in charge of overseeing the federal effort to foster national adoption of health information technology announced Friday the names of new advisers to help guide the effort and a timetable for some of its early moves in the field.

David Blumenthal, recently appointed by President Obama as the new National Coordinator for Health Information Technology, told reporters in a telephone briefing Friday that he expects to get recommendations from the advisers in early summer on how to define "meaningful use" of health information technology, a step needed to issue a regulation determining whether doctors qualify for higher Medicare payments if they employ health information technology in their medical practices.

"Those two words are the key to success in health information technology policy over the next several years," Blumenthal said.

David Brailer, who held the coordinator's post in the Bush administration, said recently that one of the biggest jobs Blumenthal faces is figuring out what constitutes meaningful use. The term has to be defined and a way to measure it has to be developed through extended rulemaking likely to generate 7,000 to 12,000 comments, Brailer predicted. All of that has to be done in time for fiscal 2011, which begins 17 months from now.

Obama has made health IT the centerpiece of his early efforts to lower health care costs, obtaining billions in funding through economic stimulus legislation to fuel the spread of the technology. The legislation provides for net additional federal spending of $19 billion for health information technology, including $2 billion in discretionary funds and $17 billion for investments and incentives offered through the Medicare and Medicaid programs to help increase the use of the technology in hospitals, doctors' offices and other medical facilities.

Blumenthal announced appointments to two advisory committees created under the stimulus legislation. One is the Health Information Technology Policy Committee, which will recommend policies for developing national "infrastructure" for exchanging health information in systems that are "interoperable" and "talk" to each other. The committee will also advise on "standards for the secure and private exchange of patient medical information," HHS said in a news release announcing the names of the new appointees.

HHS appointees to the committee are Blumenthal; Michael J. Klag, the dean of the Johns Hopkins Bloomberg School of Public Health; and Deven C. McGraw, director of the Health Privacy Project at the Center for Democracy and Technology. Another 17 members were appointed by the Acting Comptroller General of the United States and by House and Senate leaders. Its first meeting is set for May 11.

The second is the HIT Standards Committee, which will make recommendations to Blumenthal on certification criteria for IT systems and the use of health information. Its first meeting is scheduled for May 15. HHS announced 23 appointees to that committee.

"The certification process is under review," said Blumenthal when asked about the future role of "CCHIT," the Certification Commission for Health Information Technology, which has overseen certification efforts thus far. "There was a complicated committee structure in the past," he said, calling the decision by Congress to create the two new committees "a wise one." Blumenthal said he doesn't see the two new committees as duplicative of previous advisory panels, describing the new committees as having a broad policy role.

Blumenthal also said he expects to announce in late spring or early summer the details of a $2 billion grant program to help develop a health IT workforce, to foster use of health IT to improve public health activities such as disease monitoring and tracking of pharmaceutical side effects, and "geographic exchange" of data across organizations and offices of individual doctors. Blumenthal also said his office is working with the Centers for Disease Control and Prevention to get answers on possible health IT use of added flu prevention money in an upcoming supplemental spending bill to counter the H1N1 outbreak.