By Rebecca Adams, CQ Staff

April 5, 2010 -- Politicians have for years been caught in a political squeeze when it comes to Medicare. They are under increasing pressure to find a way to control rising costs of the program. But politically active seniors are the ones who scream the loudest when there is talk of cuts.

That dynamic was at work in full force during the development of the health care overhaul. And polls show older voters are among those most wary of the new health care law.

As a result, lawmakers scaled back many of their ideas for transforming the program. Instead, they tinkered at the edges of Medicare by cutting the payments of providers and insurers while appeasing seniors with benefits such as more-generous prescription drug assistance.

But that doesn't mean innovative thinking about Medicare went completely by the wayside. Congress did tuck in important tools that could eventually lead to wholesale changes in the way that Medicare, and potentially the entire health care system, operates.

The law requires the creation of a new Center for Medicare and Medicaid Innovation (CMI) by Jan. 1, 2011, within the federal agency that runs Medicare and Medicaid.

The assumption is that the innovation center will test out many of the ideas that Democrats hope to establish throughout the entire program. If those pilot projects are successful, the Department of Health and Human Services can expand them without congressional approval as long as they won't harm the quality of patients' care or drive up spending.

The challenge for the agency that runs the program, the Centers for Medicare and Medicaid Services (CMS), will be deciding how ambitious to be in developing these ideas, finding ways to sell them so that they are acceptable to the public, and assessing the effectiveness of new ideas in a system that still operates largely under traditional ones.

The new law allows for a remarkable range of experiments that the center could end up funding. Federal money could be used by state governments, for example, to test out single-payer programs, meaning residents would be covered by a unified plan run by a state agency.

Medicare could create teams of medical professionals to assist primary care doctors in monitoring the care of patients with chronic conditions. The idea here is that chronic conditions are responsible for a significant and growing portion of health care costs, and vigilant monitoring can help prevent them from causing a cascade of secondary problems.

Very sick Medicare patients at local hospitals could be monitored electronically by specialists at integrated health systems elsewhere. Programs could encourage doctors to accept salaried positions at institutions, which are easier to regulate than stand-alone medical practices. Another program that many health policy experts are watching because of its potential for cost savings would pay doctors and hospitals one payment to care for a patient, rather than paying for every service the patient needs.

A common goal threaded through many of these programs is to find ways to pay medical providers more for the value of the care they deliver rather than pay, as the current system does, for the volume of treatments. While the health care law is not the innovation-driven model that Obama envisioned when the debate started, it does push the health care establishment in that direction. For example, it creates a new nonprofit organization that will support assessments, often called comparative effectiveness research, to determine what types of medical treatments are most effective. The Patient-Centered Outcomes Research Institute will contract with academia and federal agencies such as the Agency for Healthcare Research and Quality (AHRQ) and the National Institutes of Health (NIH) to carry out research on topics such as what type of care might be most appropriate for patients with chronic conditions.

The Medicare innovation center is in keeping with that idea. The hope is that the center will find ways to save money through efficiencies while improving or maintaining the quality of the medical care patients currently receive. National health care spending has more than doubled as a share of the economy in the past 35 years.

"This is the area where we can have the most transformative change," said Neera Tanden, chief operating officer at the Center for American Progress and a former Obama administration official. "It is moving in the direction where we could really have significant savings over the long term."

Some health policy experts worry, though, that these projects may never grow beyond their initial design. Gail Wilensky, a CMS administrator from 1990 to 1992, recalls projects that proved to be successful in delivering more efficient care but were never expanded to the entire Medicare system. Among the barriers to moving a good idea from a pilot project to a full-blown policy are a change in priorities when a new president takes over, congressional opposition, lack of funding and the departure of champions of the policy.

"If a pilot lowers costs without decreasing quality, or, better yet, does both, it should be automatically part of Medicare," said Wilensky. "The problem is that these take a long time and don't on their own go anywhere. Don't fool yourself that anything will ever actually happen without a triggering mechanism."

Supporters of such innovations are hoping the center will have a more lasting impact than previous efforts. They note that the pilot projects will be different from past projects in several ways. First, the law provides a significant amount of dedicated funding to the programs — $10 billion through fiscal year 2019. Many pilot or demonstration projects in the past have been required to be budget neutral, but the law specifically allows the department of Health and Human Services to invest in the projects even if they cost money in the short term.

Another tool for expanding the programs could come from recommendations of a new commission created in the law. The commission, known as the Independent Payment Advisory Board, would recommend changes that Congress would have to consider under expedited procedures.

The proposals could still face political opposition in Congress, or Congress could reject the board's recommendations. But supporters hope that the projects will be more isolated from opposition than previous efforts.

Robert Mechanic, senior fellow at the Heller School of Social Policy and Management at Brandeis University, is optimistic about the outcome.

Mechanic, who is also director of the Health Industry Forum, a national program that develops strategies for improving health care, said the center would inspire a cultural shift and give medical providers a financial incentive to change the way they deliver care. For example, he said, doctors and hospitals may feel less compelled to run tests that may not be necessary if providers are paid one set price for a patients' total treatment rather than for each individual service.

"It's going to create a lot of energy for delivery systems that have been interested in doing this but haven't had the funding," said Mechanic. "The innovation center gives an opportunity for people to say, 'We can do care more effectively if we had a different payment model.'"

First posted April 3, 2010 6:53 p.m.

By John Reichard, CQ HealthBeat Editor

April 7, 2010 -- The Centers for Medicare and Medicaid Services has launched a new Web site offering researchers access to data on the cost and utilization of health care services around the United States.

Dubbed by CMS the "Medicare Dashboard," the agency said in a memo to congressional staff that data available on the site "can help decision makers quickly compare utilization rates of hospitals around the state and country."

Researchers have long urged Medicare to give them wider access to such data so they can unearth ways to improve the efficiency of health care.

The claims data on the Data.gov is current as of March 2010 for patients discharged from the hospital from January 2006 to December 2009. The Dashboard does not include data on beneficiaries enrolled in Medicare Advantage, the private health plan side of Medicare.

The memo also notes that Medicare claim "basic files" will be released this fall on the Web site. To be released from September to December 2010, the files cover all types of care for a 5 percent sample of enrollees in the traditional, fee-for-service side of Medicare. These claims will not be linked to individual providers or patients.

Other data to be released by CMS for free include the "Medicare Part B Summary File," which gives the volume of physician services for various procedures and total Medicare spending for those procedures.

CMS also will be making available online each state's Medicaid plan. The plans specify what benefits are provided and which populations are covered.

The Obama administration says the data release is part of its "Open Government Directive" to promote "transparency, participation, and collaboration."

President Obama said in a statement Wednesday that "for too long, Washington has closed itself off from the oversight of the American public, resulting in information that's difficult to find, taxpayer dollars that disappear without a trace and lobbyists that wield undue influence."

By Kerry Young, CQ Staff

April 5, 2010 -- Proponents have called the creation of a new Medicare payment board one of the most promising cost control elements in the entire health care overhaul plan.

That's because beginning in 2014, the 15-member panel of health care experts will have the authority to rein in long-term growth in Medicare spending that Congress could not easily block. The panel — called the Independent Payment Advisory Board — is empowered to make recommendations to the president in January. Those recommendations would take effect unless Congress clears an alternative.

This outsourcing to an independent board is intended to help overcome the political hurdles that slowed or stalled previous attempts at Medicare cost cuts.

"I am not going to sugarcoat it. This independent advisory board is very important to help improve quality of care and to control costs. It does have some teeth in it," Senate Finance Chairman Max Baucus, D-Mont., said March 24. "But I say to my colleagues: If we really want to do something about health care costs in this country, this is a start."

The impetus for the board's creation is clear. Even before the oldest of the baby boomers turn 65 next year and age into Medicare, its annual expenses will top $500 billion, or about 15 cents of every federal dollar spent.

Beyond Medicare, the hope is that the board's work could help trigger savings throughout the U.S. health system by testing new approaches to paying doctors, hospitals and other providers. Insurance companies often follow the decisions made by Medicare, which covers more than 45 million Americans.

Skeptics, however, are dubious that those goals can be achieved. They point out that Congress already has given the board a lot of lead time — its first recommendations aren't due until 2014 — and blocked it from considering cuts to hospitals until 2020. Moreover, the health law specifically bars the board from recommending changes in benefits, eligibility requirements or cost-sharing requirements. It also prohibits recommendations to ration health care, or to raise taxes or Medicare Part B premiums.

Perhaps the first challenge for the Obama administration will be filling the board's 15 full-time seats. The law calls for the members to be appointed by the president and confirmed by the Senate for six-year terms. But it bars those members from working for outside businesses or other groups to prevent conflicts of interest and ensure a full-time commitment.

That may end up ruling out some well-qualified candidates, said Daniel N. Mendelson, president and founder of the consulting firm Avalere Health, and a former associate director for health at the Office of Management and Budget.

"If you end up not letting people who understand about issues on the board, the board is not going to be very powerful," he said.

A more daunting challenge may be in the Senate confirmation process. There have been 16 cloture motions filed on executive nominations since 2009, only one short of the 17 such motions filed during the two terms of George W. Bush's presidency.

Filling even less prominent posts has been difficult. There remain two vacant seats for independent advisers for the Social Security Board of Trustees, which produces a detailed annual report on Medicare's finances. And that board is not that controversial when compared with the Medicare panel, which has taken shots from across the political spectrum.

Conservative Republican Sen. Pat Roberts of Kansas called the new advisory board part of a "rationing apocalypse" and "the infrastructure for the 'Brave New World' of big-government intrusion into health care decisions of all Americans."

Liberal California Democrat Pete Stark, who leads the Health panel of the House Ways and Means Committee, pointed out that if the board fails to send Congress a set of recommendations, the law calls on the Health and Human Services secretary to send a proposal in its place.

"It is one thing to give an independent board of health care experts such sweeping power to change the Medicare program, but it is quite another to give that power to a partisan political figure who reports directly to the president," Stark said.

And that criticism is coming before the board has even been constituted. Once it gets rolling, it is likely to face heavy resistance from the groups who would bear the brunt of any changes. Companies, doctors and hospitals often have the clout to drown out recommendations for new payment approaches or cost cuts, including those from Congress' own board of expert advisers, the Medicare Payment Advisory Commission (MedPAC).

Even with legislative protections built into the process and recently enacted pay-as-you-go rules in place for Congress, these groups will continue to try to exert their influence on what they consider unfavorable Medicare policies. More than four dozen specialty medical associations and trade groups asked Democratic leaders in January to drop the board from the bill.

"What is to stop Congress from 'neatening' up around the edges of what the board does by passing subsequent bills?" said Joseph Antos, a health researcher at the conservative-leaning American Enterprise Institute.

With 15 members, moreover, the board will probably be large enough to represent many industries that would be targets of cuts, Antos said.

Diane Lim Rogers, chief economist at the deficit-fighting nonpartisan Concord Coalition, said the group's success hinges on "future administrations and Congresses following through on a level of discipline and a set of policies that they themselves did not set," she said.

"Everything we already know to do to reduce health costs is exactly what the politicians want to put off until someone else is in charge," Rogers said.

GOP Rep. Paul D. Ryan of Wisconsin has also expressed skepticism that the board's recommendations will ever take effect. In March, he asked the Congressional Budget Office to assess the law's financial impact if several provisions were altered, including the one creating the advisory board.

But the critics will find it difficult to dismantle the board.

The health care law lays out a complicated path for dissolving it, requiring the introduction of a joint resolution by early 2017 that must have the support of 60 percent of each chamber.

It also includes procedures to speed the board's recommendations through both chambers, including time limits on debate. To make significant changes would require support of three-fifths of the Senate.

That approach pleases researchers who have long fought to change most payment incentives so that Medicare pays for quality of service, rather than just quantity.

"You structure a choice that it's harder to walk away from," said Elliott S. Fisher, director of the Center for Health Policy Research at Dartmouth Medical School.

Dartmouth research has established that spending more Medicare dollars on a patient doesn't necessarily lead to better health outcomes and, in some cases, may have the opposite effect.

"In the long run, if we move toward a payment system that rewards better value on a level playing field, innovators who come up with high-value treatments or better ways of delivering the same care at lower costs will be rewarded," said Fisher.

By John Reichard, CQ HealthBeat Editor

April 9, 2010 -- While the health care overhaul law requires state Medicaid programs to expand their coverage in 2014 to include people with incomes up to 133 percent of the federal poverty line, that doesn't mean states have to wait until then to begin expanding their programs.

In a letter released late Friday by the Centers for Medicare and Medicaid Services, the agency notes that the law (PL 111-148) establishes a new Medicaid eligibility group and the option for states to begin providing medical assistance to those who qualify for the new group, effective April 1, 2010.

"Under the law, for the first time since the Medicaid program was established, states will receive federal Medicaid payments to provide coverage for the lowest income adults in their states, without regard to disability, parental status or most other categorical limitations, under their state Medicaid plans," says an April 9 letter to state Medicaid directors from Cindy Mann, director of the CMS Center for Medicaid and State Operations.
Mann said "this means that states do not have to wait until January 2014 to cover adults they have previously had no authority to cover under a state plan, including adults under age 65 who are neither disabled, pregnant, nor living with dependent children and who do not have other special circumstances."

When states have to begin covering the group in 2014, they will receive higher amounts to do so from the federal government. But "taking up the optional early expansion does not preclude or in any way affect receipt of the increased matching rate" in 2014, Mann added.

States that do choose to begin coverage now won't receive the increased levels of federal Medicaid payment temporarily available under the economic stimulus law.

States "can set the income eligibility standard for the new group at any level up to 133 percent of the federal poverty level," the letter says.

By Rebecca Adams, CQ Staff

April 5, 2010 -- From day one, President Obama and other proponents of a health care overhaul promised to help people with pre-existing health conditions who find it difficult, if not impossible, to get insurance coverage.

So it is not surprising that providing such coverage is one of the first parts of the new law to take effect — and it's required to happen within the next three months.

It's a daunting timetable, and the pressure is even more intense given the expectations associated with the new law. A slight delay or isolated snafus for some patients could give critics ammunition to paint the entire endeavor as a failure.

Among the problems experts foresee: How will the new federal program square with existing high-risk pools at the state level? Is there enough money to cover as many as 2 million new enrollees? Will the program be up and running by its deadline?

Building a new network of providers throughout the country from scratch — not to mention setting payment rates and signing contracts — is virtually impossible within the next 90 days. For that reason, Health and Human Services (HHS) secretary, Kathleen Sebelius announced April 2 that she would seek to build on existing state programs and where necessary, contract with not-for-profit insurance carriers as a temporary solution until 2014 when insurance companies will have to take all comers.

Yet even piggybacking on existing programs could prove difficult.

"I can't imagine how they'll push all this out in this short turnaround," said Joy Johnson Wilson, director of health policy for the National Conference of State Legislatures, predicting that HHS officials will miss at least some of the first-year deadlines in this and other programs.

Sebelius, however, discounted the difficulties, saying she had written governors and state insurance commissioners asking whether they would participate and on what basis. If they do not, she said, HHS would set up the programs.

Currently, 35 states run pools for people who have trouble buying insurance because of pre-existing conditions, although not all of the programs are accepting new patients. Coverage costs vary significantly from state to state, with 2009 premiums for a 50-year-old ranging from a low of $377 per month in Maryland to a high of $1,362 in Washington, according to the Kaiser Family Foundation, a nonprofit research organization.

But the premiums in the state pools can be much more expensive for people who are very sick — so expensive that in a nation of about 47 million uninsured people, only about 200,000 get coverage through the pools. Premiums are likely to be lower in the federal program because they would be subsidized.

Sebelius may also contract with not-for-profit insurance carriers, particularly in states without a high-risk pool. One option would be working with the plans that belong to the Blue Cross and Blue Shield Association.

However, neither Blue Cross, nor officials in the National Association of State Comprehensive Health Insurance Plans (NASCHIP), which represents administrators of the state high-risk pools, say they know how the agency will proceed. Neither does America's Health Insurance Plans, the insurers' trade group.

"We need specifics as to what the final enrollment criteria would be and what coverage options would be desired, as well as how the funding would be distributed," said Vernita Bridges-McMurtrey, executive director for the Missouri Health Insurance Pool and the chairwoman of the national group's board of directors. "I don't think any of that has been determined yet."

One of the first issues that HHS must address is whether it will require high-risk pools in every state. Six states already prohibit denial of coverage based on pre-existing conditions — a policy known as "guaranteed coverage." Another seven states have some insurance regulations that help give people with pre- existing conditions access to insurance, according to the Kaiser Foundation.

Blue Cross officials question whether Sebelius needs to create programs in states that already require insurers to offer coverage to all comers.

"The real problem is that if you're sick and uninsured and you have to buy coverage on the individual market, in [a small number of] states, there's no place to get the coverage that you need. That should be the priority," said Alissa Fox, the association's senior vice president for policy and representation.

Consumer advocates agree, saying the most important thing is whether coverage is affordable, not where people get it.

"There are a number of states that use mechanisms other than high-risk pools to guarantee coverage to people who would otherwise be uninsurable," said Cheryl Fish-Parcham, deputy director of health policy for Families USA. "Those systems are underfunded and need to be able to use federal money to stabilize premiums and keep them affordable."

Sebelius will have to decide quickly how much flexibility to give state officials. One issue that has come up is whether the new law allows expansion of existing state pools, or whether it requires states to create a second pool.

Some believe a second pool may be necessary because federal law requires applicants to have been uninsured for at least six months. However, people in the existing high-risk pools have insurance. That means they may be ineligible for the new program, which is likely to charge lower premiums, according to state officials who have raised the issue with HHS.

"We are concerned that the population in those programs who have done the right thing in buying insurance, regardless of how high the premiums they had to pay were, may very well feel penalized because they bit the bullet and paid the high rates, and then the federal program is more attractive and they don't have access to it," said Bridges-McMurtrey.

Jeanne Lambrew, deputy director of the White House Office of Health Reform, said it was "premature" to say how the issue might be resolved, but that the administration's goal was to be as flexible as possible to get people enrolled quickly.

Another question is whether the federal government is setting aside enough money to cover the program's costs. The law provides $5 billion to be spent from this year until the new exchanges are running in 2014. But according to the Kaiser Family Foundation, states with high-risk pools collectively spent roughly $900 million to subsidize excess losses for the 200,000 enrollees in 2008. Health experts say the new pools could attract as many as 2 million people.

The authors of the law gave the agency the right to stop enrolling people if funds run out. But if HHS exercises that power, the administration will face a political backlash.

Hanging over all of these issues is the time pressure. State officials say they are already besieged by calls from citizens seeking information on how to access the new program.

"It honestly is an extremely short window to establish a brand new program when you consider the pieces that have to be in place," said Bridges-McMurtrey. "A lot of work remains to be done."

By Jane Norman, CQ HealthBeat Associate Editor

April 5, 2010 -- Nobody said that dramatic change in the nation's mammoth health care system would be a breeze, and federal officials are experiencing plenty of headaches in just the first weeks after the overhaul was signed into law by President Obama. How will states handle the new high-risk pools? Will retiree prescription drug benefits provided by employers take a hit?

But a new survey released on Monday by the Commonwealth Fund also found that most health care opinion leaders think that access to affordable insurance will be improved for the uninsured under the new law, and most of the 201 questioned support the law's key features. Over the short term, though, the opinion leaders said that there may be problems in several familiar areas that have long been a worry when it comes to the overhaul — the number of primary care doctors available to provide care, states' ability to provide health care and enforcement of the mandate that every American must possess health insurance.

Other concerns loom as well. "Longer term, opinion leaders believe that improved affordability provisions for low- and moderate-income families, prevention and control of chronic disease and stronger cost controls are the most important issues to be readdressed in the next two to three years," said the study by Kristof Stremikis, Karen Davis and Rachel Nuzum of the nonprofit fund.

One way in which the law provides immediate help for the uninsured with pre-existing conditions is by authorizing the creation of state-by-state high-risk insurance pools, with the help of $5 billion in federal funds available on July 1. The federal support is set to end in 2014, when insurance companies will be required to accept all comers regardless of their health status.

Health and Human Services Secretary Kathleen Sebelius wrote to states on April 2 about their interest in participating in helping extend insurance to people with pre-existing conditions who have lacked insurance for at least six months before applying.

"We are interested in building upon existing state programs in this important initiative to provide expanded access to health coverage for individuals who cannot otherwise obtain health insurance. To that end, I am writing you today to request an expression of your state's interest in participating in this temporary high-risk pool program, consistent with one of the implementation options described below," Sebelius said in the letter.

She offered options, sayings that states can choose to operate new high-risk pools alongside existing ones, establish new pools in states that don't now have them, build on other existing coverage to assist people who can't now get insurance, contract with a private insurance company to provide subsidized coverage — or do nothing, in which case there would be no program in the state.

The letter said a review of state programs has found common ground in the benefits currently provided, and since HHS is considering a floor for benefits that all new programs would have to cover, it's anticipated that current benefit lists would be taken into account. Also, Sebelius said, states could follow criteria for pre-existing conditions set by the government, or could set their own, subject to federal approval. "We are committed to working with states to identify other areas where flexibility is appropriate," she added.

But many other details remain unclear, and HHS officials indicated in the letter that more information will arrive in states' hands by mid-April.

A troublesome issue that's cropped up is the reaction from corporations who contend they might have to scale back or drop prescription drug coverage for their retirees because of tax provisions changed by the new law. Republicans have pounced on that development as proof that the new law already is harming business and could shove retirees onto public plans, which already have grown in enrollment in recent years as companies drop health insurance, baby boomers age and workers lose jobs.

When the Medicare Part D prescription drug law was written in 2003, a tax break and federal subsidies were provided to employers to discourage them from dropping their retiree prescription drug coverage. Companies now will continue to receive a 28 percent taxpayer subsidy, and they will continue to be able to deduct all their own expenditures on the benefits. But they will no longer be able to deduct the federal subsidy money in addition.

Caterpillar Inc., Deere & Co., AT&T, Verizon Communications Inc. and Prudential Financial Inc. have said they will have to take first-quarter write-offs to reflect future higher costs due to the new tax provision. Some analysts are projecting write-offs as high as $4.5 billion by big firms in the first quarter alone, according to the Healthcare Reform Watch Group at the law firm Sonnenschein Nath & Rosenthal.

House Energy and Commerce Committee Chairman Henry A. Waxman. D-Calif., has called a hearing for April 21 to examine whether retirees will be affected, and issued letters to Verizon, Deere and Caterpillar. The committee said in a statement that company statements "appear to conflict with independent analyses which show that the new law will expand coverage and bring down costs."

Said Sebelius, on CNN, "They have been actually taking tax deductions on money that the government has given them in the first place. That will cease under this bill."

But Rep. Michael C. Burgess, R-Texas, said on Fox Business Network that the fact that the companies have been ordered to testify appears to be "naked intimidation at its worst" and that they were reporting their projections as required under the law.

"This is bad news for workers, and it's terrible news for the broader economy," Senate Minority Leader Mitch McConnell, R-Ky., said in the March 27 GOP response to the president's weekly radio address.

Brighter news for advocates of the new law came with the Commonwealth Fund survey, which queried health care experts in academia and research; health care delivery; business, insurance, and other health industries; and government, labor and advocacy groups.

Some 88 percent said the new law will successfully expand access to the uninsured, though there was more doubt about whether it would improve affordability for Americans who already have coverage, control rising costs and not add to the deficit. A majority also supported changes in medical malpractice laws, though the new law does not go further than authorizing grants to try out alternatives to lawsuits.

In an accompanying commentary, former HHS Secretary Michael Leavitt, a Republican who served under President George W. Bush, said that the law is a significant accomplishment but if he had his way, it would have focused on the real problem — cost. "Solving the cost problem paves the way for expansion of insurance coverage to follow," said Leavitt.

Former Senate Majority Leader Tom Daschle, D-S.D., in another commentary lavishly praised the new law but said it's just a beginning.

"This landmark legislation now gives us the opportunity to move the ball toward the goal