By John Reichard, CQ HealthBeat Editor

July 8, 2011 -- The Children’s Health Insurance Program (CHIP) could take a major hit in coming years because of two proposals under discussion in the ongoing debt ceiling negotiations.

It’s not because the program is unpopular. In fact, CHIP isn’t itself a target, advocates say. It’s that negotiators are considering changes to Medicaid that could have the effect of allowing states to cut the program.

“The big thing about it is no one is overtly trying to eliminate CHIP,” says Bruce Lesley, president of the Washington, D.C.-based children’s health advocacy group First Focus. “No one is focused on it.”

This is not the first time CHIP has been on the bargaining table, and this time, as in the past, advocates have come out in force.

The program has enjoyed a loyal and bipartisan following since it was created as part of the 1997 balanced-budget law (PL 105-33). Working behind the scenes, Republicans led by Sen. Orrin G. Hatch of Utah negotiated language with the Clinton White House creating the program to cover kids in families making too little to afford private coverage and too much to be on Medicaid. When Congress debated the health overhaul in 2009, Hatch cited CHIP as a model, praising its fixed allotments to the states and their leeway to fashion their own programs.

CHIP has elicited the same passion from the other side of the aisle. When early drafts of the health care law threatened CHIP’s extinction, Democratic Sen. John D. Rockefeller IV of West Virginia almost single-handedly saved the program. He stepped in after other lawmakers had decided to drop CHIP because of provisions that would cover the uninsured by sharply expanding Medicaid and subsidizing the purchase of coverage in insurance exchanges. The law requires that states keep their CHIP programs at current eligibility levels through 2019.

Now, pressure on state budgets is causing Republicans to push for elimination of Medicaid “maintenance of effort” requirements in the 2010 health law (PL 111-148, PL 111-152). This rule says states must maintain current Medicaid eligibility levels for adults until 2014, when state insurance exchanges start, and for children through 2019. Lawmakers seeking an end to the maintenance of effort rule are focused on reducing Medicaid eligibility, not CHIP, Lesley says. But erasing the requirement in any debt deal would also end the mandate that states maintain CHIP programs through 2019.

If that happens, the Congressional Budget Office (CBO) estimates, half the states would end their CHIP programs after insurance exchanges open in 2014. CHIP enrollees could get their coverage from the exchanges, using federal subsidies for their families to buy private insurance. According to CBO, the number of CHIP enrollees would drop by 1.7 million by 2016 under that scenario, and not all of them would qualify for the exchanges. About 300,000, CBO says, would go uncovered.

An Uncertain Fate
An even bigger threat in the debt talks, according to Lesley, is an Obama administration proposal to save $100 billion by establishing a uniform figure for the percentage the federal government pays of Medicaid costs. Now, the federal percentage varies state by state. A uniform figure, calculated by blending together the current state-by state federal percentages, might also be used to set the federal share of CHIP payments. If Washington pays the same percentage for both Medicaid and CHIP costs, states won’t have an incentive to set up a separate CHIP program and there may be less money to do so, he says.

Rockefeller said Thursday that if the president does “the wrong thing” and the proposal is part of the final debt deal, Obama will “get rid of CHIP.”

For CHIP’s passionate supporters, that would be a disaster. Rockefeller says the insurance offered by exchanges will be “watered down” compared to that provided in CHIP. Lesley says that a study commissioned by First Focus shows that exchange coverage will involve paying higher out-of-pocket costs than families pay under CHIP. And he points to the CBO assessment that not all enrollees would stay insured if CHIP coverage ends.

Health and Human Services Secretary Kathleen Sebelius, speaking Friday, appeared to downplay the chances that a blended rate would be used to make cuts. “A lot of states get nervous” about the idea of a blended rate that would reduce overall federal funding, she said in a telephone call with reporters.

But even if the debt deal only eliminates the maintenance of effort requirement, CHIP enrollment would still take a big hit. And even if the requirement stays, there’s still plenty of uncertainty about CHIP’s long-term future.

The health law only funds CHIP through 2015, which will prompt an analysis that year of how well exchanges are serving children and whether CHIP is really needed.

“I think CHIP is a great program but I think exchange coverage is going to be good too,” says Matt Salo, executive director of the National Association of Medicaid Directors. After 2014, “you’re not dumping people out with a safety net,” he adds. “At that point, states can make the same business decision that employers will make: provide direct coverage or facilitate coverage through the exchange.”

By Jane Norman, CQ HealthBeat Associate Editor

July 8, 2011 -- Rising costs in the health care system are a key issue as lawmakers and the Obama administration negotiate on a deficit reduction plan. On Friday, Health and Human Services officials reminded people that the agency is doing its part to bring costs down.

More than 2,000 hospitals and 2,500 other organizations have signed on to a voluntary Medicare initiative aimed at reducing medical errors in the nation’s health care system, HHS officials announced Friday. The goal is to help patients and also curb the costs associated with hospital errors.

The Centers for Medicare and Medicaid Services said that in less than three months the agency has met its goal of getting 2,000 hospitals to participate in the Partnership for Patients. The aim is to reduce preventable hospital errors by 40 percent in the next three years. According to the Kaiser Family Foundation, as of 2009 there were more than 5,000 hospitals in the United States.

In unveiling the three-year project earlier this year, Health and Human Services leaders said it has the potential to help save 60,000 lives and save up to $35 billion in costs, including $10 billion just for Medicare.

At the time it was launched it already had the backing of 500 hospitals, physicians and nurses groups, consumer organizations and employers, HHS officials said. But it is not an easy decision for a hospital to take part. Because it’s voluntary, the project requires time and resources from hospital CEOs and staff members at a time when they’re also working to comply with the health care law (PL 111-148, PL 111-152).

The agency is spending $1 billion from the law to put the partnership in place.

“This level of participation, this early, is evidence of the strong support across the country for strengthening American health care for future generations by improving it; not cutting it as some have proposed to do,” HHS Secretary Kathleen Sebelius said in a statement.

President Obama and congressional leaders are deep in negotiations on the deficit as they face an Aug. 2 deadline to raise the $14.3 trillion debt ceiling, and saving money in public health programs is a major issue. The House Republican budget, authored by Budget Chairman Paul Ryan of Wisconsin, would have reduced Medicare spending by changing the program into one in which people used an allocation from the government to choose their own health care plan. Americans now over 55 would not be affected.

The Obama administration also has proposed reductions in Medicare spending by giving additional powers to an independent advisory board, among other measures. However, administration officials say they would accomplish their reductions by curbing health spending rather than affecting beneficiaries.

Sebelius said Friday that Iowa hospitals were particularly to be congratulated for their 100 percent participation in the patient safety initiative.

“At a time when Medicare costs are expected to rise steeply over the next decade—and given that we lose billions to waste, harm, and error in care—every partner in this program has committed to working together to build a better, safer, more reliable health care system for all,” she said.

The project is supposed to reduce the number of preventable in-hospital medication errors, central-line associated bloodstream infections, falls and other injuries. In addition, providers are to help patients heal successfully after discharge, and target unnecessary return visits.

Medicare administrator Donald M. Berwick said in a statement that HHS knows progress is possible because there are providers all over the country who have made major inroads against specific forms of harm. He pointed to the public hospital system in Denver, where safety has been improved by having disinfectant foam available outside each patient’s room and there are checklists at the bedsides.

HHS officials are discussed the partnership in a call with providers Friday.

Jane Norman can be reached at [email protected].  

By Rebecca Adams, CQ HealthBeat Associate Editor

July 7, 2011 -- Supporters and critics of the Independent Payment Advisory Commission (IPAB), which will recommend Medicare payment cuts when it starts work in 2014, are gearing up for a marathon debate over the issue in two House hearings next week.

The House Budget Committee will start the action on Tuesday with a hearing featuring Health and Human Services Secretary Kathleen A. Sebelius.

Four panels of witnesses—with three House members and a senator on the first panel, followed on the second round by Sebelius—are scheduled to testify at a House Energy and Commerce Health Subcommittee hearing Wednesday.

Beginning in 2014, the commission, which was created in the health care law (PL 111-148, PL 111-152), will have the authority to issue recommendations to cut Medicare spending if it exceeds certain levels. Those recommendations would become law unless Congress overrides them.

Republicans have ramped up their criticism of the board for having too much power and too little oversight, as have health advocacy organizations.

Supporters of the commission say that it will play an important role in restraining the growth of Medicare spending.

Interest groups are planning events around the hearing and sending letters to committee members in advance of the discussion. For example, the Heritage Foundation is sponsoring a forum on Tuesday entitled, “IPAB and Rationing Vs. Choice and Competition.”

The American Medical Association sent letters supporting bills (S 668 and HR 452) that would repeal the commission’s power. The measures were authored by Sen. John Cornyn, R-Texas, and Rep. Phil Roe, R-Tenn.

Another medical provider group that supported the overall law wrote to the House committees to express its concerns about the commission.

"The IPAB would operate under a requirement of creating savings through reductions in Medicare spending, independent of fundamental reforms that would advance long-term improvements in quality, safety, and efficiency. By prohibiting IPAB from altering coverage and benefits for beneficiaries,” wrote Karen J. Nichols, president of the American Osteopathic Association. “Finally, IPAB contributes to the concept of fragmentation by ignoring the growing trend of care being delivered in ambulatory versus inpatient settings.”

 Rebecca Adams can be reached at [email protected]

By Melissa Attias, CQ Staff

July 7, 2011 -- At a time when many governors are looking to Medicaid as a place to cut costs, a study released Thursday found that among some Medicaid patients, interstate variations in spending are shaped more by the volume of care provided to patients than the prices paid for services.

The analysis, appearing in the July issue of Health Affairs, was based on Medicaid spending data from 2001 to 2005, but it was limited to Medicaid-only beneficiaries who were disabled and receiving cash assistance since a uniform national eligibility standard exists for those recipients.

The study also found that some large states are spending twice as much per beneficiary as similarly-sized states.

In the 10 highest-spending states, per capita spending was $1,650 above the national average, with $1,186 or 72 percent due to the volume of services delivered. The 10 lowest-spending states, in contrast, spent $1,161 below the national average, with $672 or 58 percent attributed to volume.

The study also found that increased price and volume resulted in the most expensive care in the mid-Atlantic compared to other regions, while reduced price and volume produced the least expensive care in the south central region.

Lead author Todd P. Gilmer, a University of California, San Diego professor, said states can use some of the findings as benchmarks for their programs as they see how they compare to other states. They can also look to more successful states “to see what kind of innovative practices they’re pursuing,” he said, and use the information to suggest some areas for change.

Gilmer pointed to the example of Washington state, where acute care spending was 18 percent below the national average, inpatient days per beneficiary were 35 percent below average, and outpatient visits and prescription fills were each 15 percent above average.

The study also found that higher numbers of primary care physicians were associated with lower hospital admission rates for diabetes, chronic obstructive pulmonary disease and adult asthma.

And it found that when Medicaid patients saw their doctors more and doctors were paid higher rates for those visits, it likely led to fewer hospitalizations. That suggests, the researchers said, that increased primary care access may result in lower admissions rates.

As a result, the authors said that they expect that the provisions of the 2010 health care overhaul (PL 111-148, PL 111-152) aimed at increasing access to primary care, such as expanding the size of the primary care workforce and temporarily increasing physician payment rates under Medicaid, may reduce inpatient admissions. They also noted that the law’s planned 2014 expansion of the Medicaid program makes the findings particularly relevant, as states and the federal government face fiscal, administrative and system challenges regarding its implementation in the coming years.

“Our hope is that the results presented here will provide Medicaid programs with the tools to help them continually improve their ability to purchase cost-effective, high-quality care,” they wrote.

By Rebecca Adams. CQ HealthBeat Associate Editor

July 7, 2011 -- Enrolling in Medicaid increases the chances that patients will get preventive care, see a doctor, and be more content, according to the most comprehensive study in nearly four decades to evaluate the program’s impact.

The new 56-page paper by the National Bureau of Economic Research assessed an Oregon lottery program that allowed some low-income adults in 2008 to vie for the chance to receive Medicaid benefits. The study compared the experiences of people who were granted Medicaid coverage with those who signed up for the lottery but did not win coverage.

The study comes as Congress debates cuts to Medicaid, the federal-state program for the low-income, people with disabilities and nursing home patients. The health care law (PL 111-148, PL 111-152) also called for a major expansion of Medicaid. Some critics, particularly
Republicans, have said many physicians won’t accept Medicaid and that the program is so inferior to other types of coverage it would be only a modest improvement over being without benefits at all.

The Oregonians who enrolled in Medicaid had a 30 percent higher chance over 16 months of being admitted to the hospital, a 15 percent greater likelihood of taking prescription drugs, and a 35 percent increase in the probability of having an outpatient visit. Medicaid patients were 25 percent less likely to have an unpaid medical bill sent to a collection agency (a result that doctors and other providers probably appreciate,) and 35 percent less likely to have out-of-pocket medical costs.

Medicaid patients got more preventive care and saw regular physicians more than the uninsured. Patients with coverage were 20 percent more likely to get their cholesterol checked and women were 60 percent more likely to get mammograms. Medicaid beneficiaries were about 55 percent more likely to have a doctor they routinely visited for medical needs.

As a result, Medicaid beneficiaries reported a 32 percent increase in their overall happiness. But the authors said it was hard to tell how much of that came from better physical health, lower levels of stress due to financial burdens, or other factors.

Health care costs for the approximately 30,000 people who got benefits rose by about 25 percent. “This back-of-the-envelope calculation suggests that insurance is associated with a $778 (standard error = $371) increase in annual spending” per patient, the paper said.

The authors included Massachusetts Institute of Technology economist Amy Finkelstein, who served as a staff economist during the Clinton administration on the Council of Economic Advisers (CEA); Harvard economist Katherine Baicker, who served on the CEA during the George W. Bush administration from 2005-07, and MIT economist Jonathan Gruber, who consulted for the Obama administration.

NBER Paper (pdf)

Rebecca Adams can be reached at [email protected].

By John Reichard, CQ HealthBeat Editor

July 6, 2011 -- The health care law will disappoint many Americans if its health insurance exchanges don’t deliver decent coverage at affordable rates for consumers, including those with serious illnesses like cancer.

Meeting those expectations may be difficult, judging from comments by a major patient advocacy group as it waits for the Obama administration to release rules governing the development of the exchanges and watches state legislatures draft exchange laws.

For example, the American Cancer Society Cancer Action Network recently released a series of “threshold questions” that states should address if they are going to design exchanges under the laws that meet the needs of cancer patients.

They include: Will boards overseeing exchanges be structured to meet consumer interests? Will insurance market regulations outside of exchanges discourage these marketplaces from becoming a dumping ground for bad insurance risks? Will it be easy for exchange customers to enroll in Medicaid or move from Medicaid to private exchange plans when their incomes rise? Will the exchanges have a stable source of funding? Will they be an “active purchaser” with the power to exclude plans that offer lousy value?

Stephen Finan, senior director of policy for the Cancer Action Network, said in an interview Wednesday that “it’s a mixed bag” in terms of how well states are doing so far on those parameters. Of the dozen or so states with exchange laws, California, Connecticut, and Maryland are “on the good end” of the spectrum and Colorado, Oregon, and Nevada are on the “not so good” end, he said.

States that are moving in the right direction have done a good job dealing with critical issues like governance, he said. They are coordinating their outside markets to work well with exchanges and keep them from attracting disproportionate numbers of insurance enrollees who are costly to cover. These states also are on track to coordinate well with Medicaid programs and have a stable source of funding, with plans to charge fees to all insurers in the state, not just those that offer coverage on the exchange.

States performing inadequately, on the other hand, are setting up exchange oversight boards that are too big, or have too many insurers or providers running things. These states won’t coordinate well with the outside market, and they would leave funding of exchanges to the uncertainty of the yearly appropriations process.

The overwhelming majority of states have yet to pass legislation creating exchanges, which means it’s still unknown whether exchanges in most states will prove worthwhile for consumers. Finan said that the upcoming proposed exchange regulation to be issued by HHS could push states in the direction of making good decisions by offering guidance on creating effective exchanges.

But Finan said he thinks the proposal will be very wide ranging. “It could be a soup-to-nuts thing for every option” for creating exchanges, he said. And making a good exchange is a challenging proposition that involves much more than simply knowing about a wide range of design options. “It’s not just the pieces, it’s how they fit together,” he said. “It’s not an easy thing to build a good exchange.”

“What we hope is that the final regulation will establish clear minimum standards,” he said. “I don’t think we’ll see that in the proposal,” he added, predicting that it will list a wide array of design options in order to draw a wide range of comments.

Consumer advocates may face difficulty obtaining a final exchange regulation to their liking.

Republicans have traditionally been strong allies of the insurance industry, and the industry has a history of turning exchanges into dumping grounds for bad risks. But Finan says that consumer groups are coordinating their efforts to produce exchanges that work well for their members.

“The insurance groups have been talking regularly for almost a year,” he said. “We have weekly phone calls on exchange-related issues. We’re trying first and foremost to exchange information and educate each other.” In addition to the American Cancer Society, groups involved in the talks include Consumers Union, the Center on Budget and Policy Priorities, AARP, Families USA, the Small Business Majority, Health Care for American Now, SEIU, and the National Partnership for Women and Families. Finan said that in the end they may submit a common letter commenting on the proposed rule. If not, “I think there will be a fairly uniform set of messages,” he said.

John Reichard can be reached at [email protected].