By Jane Norman, CQ HealthBeat Associate Editor

May 20, 2011 -- One of the biggest unanswered questions about the huge expansion of Medicaid coverage expected in 2014 is what to do about people whose incomes or family makeup change, prompting a move from one type of health care coverage to another.

A February study in the Health Affairs estimated that 28 million people in a typical year will shift between being eligible for Medicaid and for subsidized health care through the health insurance exchanges.

And it's an issue many states are wrestling with as they design their exchanges.

No magic solutions are at hand. But panelists at an Alliance for Health Reform forum tried to untangle the knot. Most ideas revolved around the need for state and federal policy makers to coordinate eligibility for Medicaid and the Children's Health Insurance Program with the new subsidized plans to be offered through the health benefit exchanges.

"The goal is to achieve continuity of coverage," said Deborah Bachrach, a lawyer and health policy expert with Manatt, Phelps & Phillips.

The health care law (PL 111-148, PL 111-152) will bring together in the states two different worlds that in the past have existed separately, she said—that of Medicaid administrators and insurance commissioners.

In a paper for the National Academy for State Health Policy, Bachrach argues that this new alliance provides states with "new opportunities to consolidate and rationalize the oversight of public and private insurers and powerful new tools to drive delivery system reform."

Shifts in coverage already happen now when low-income people move in and out of Medicaid in its current form. It's known as "churn."

But the problem—and likely confusion for enrollees—will be magnified when Medicaid is expanded to cover everyone earning under 133 percent of the federal poverty level.

It's projected that 18 percent of Americans eventually will be enrolled in Medicaid and by 2019 it will be the second-largest source of health coverage for people under 65. In addition, through the state health benefit exchanges, Americans earning up to 400 percent of the poverty level will be able to get subsidies.

People whose life circumstances change will be moving between programs that could have very different enrollment requirements, provider networks, coverage and more. And as the Health Affairs study indicates, such churn may be common.

A study for the Commonwealth Fund by Pamela Farley Short of Pennsylvania State University found that a quarter of people with incomes below 133 percent of the poverty level in 2005 had higher incomes in 2006.

Short, one of the panelists, said there's even more churn among the group of people with incomes just above 133 percent and up to 200 percent. And it will be a challenge for states to keep those people enrolled without gaps. Some may find it so complicated and confusing they just give up. "We know it takes special effort to get high participation rates," she said.

In her study, Short recommended that federal and state authorities assign a high priority to coordinating eligibility for premium credits with eligibility for Medicaid and CHIP. One option would be for states to create basic health plans for residents between 133 percent and 199 percent of poverty rather than enrolling them in exchanges, she said, thereby creating uniform standards across those three programs.

Another option would be to extend eligibility for Medicaid and CHIP until the next open enrollment period at the end of the year, she said, easing uncertainty and minimizing changes in coverage.

She also recommended states try to simplify the transitions for people moving between the individual exchanges and small business exchanges and among those who lose or gain jobs with small firms. Many low-income people work for small companies, her research has found.

A single exchange that covers both individuals and small business would help people retain coverage and reduce administrative costs, Short said.

Another panelist, Louisiana Medicaid Director Don Gregory, described how his state has moved aggressively to stay in touch with Medicaid recipients and keep them enrolled without gaps in coverage. In 2,000 the state found that it had a net loss of 6,000 children a month from its programs for "paperwork" reasons.

A telephone renewal process was instituted as well as heavy reliance on computer systems for income verification and eligibility renewal. State workers would call up Medicaid enrollees when paperwork went missing, rather than sending them letters. "We simply started using the darn telephone," he said. By August 2010, the state couldn't renew for procedural reasons just 327 children, out of more than 45,000, Gregory said.

By John Reichard and Jane Norman, CQ HealthBeat

Medicare officials moved on three fronts to quiet a growing chorus of criticism that has fueled doubts about whether a key program under the health care law to control Medicare spending—the formation of accountable care organizations—will ever get off the ground.

But early reaction from groups representing two key players, hospitals and doctors, was tepid. Too many other problems remain with the proposed ACO rule, they said. "I think it's a positive step forward but pretty marginal. I don't think it's going to be a big game changer," said Lisa Grabert, senior associate director for policy at the American Hospital Association.

Efforts by the Centers for Medicare and Medicaid Services (CMS) to launch the program have been marred by the statements of leading-edge organizations that they will not seek ACO status to contract with Medicare. At the other end of the spectrum, many hospitals lacking in resources have complained that creating ACOs requires too much money and that they won't be able to participate.

The CMS response: The agency will confer "pioneer ACO" status on some 30 leading-edge organizations contracting with Medicare to begin this fall. The agency is using its authority under the health care law (PL 111-148, PL 111-152) to test innovative programs through the Center for Medicare and Medicaid Innovation to launch the program. It's estimated that the Pioneer ACO Model will save the Medicare program $430 million over three years. Letters of intent from interested groups must be submitted by June 10 and applications are due by July 18.

The pioneers would move more quickly from the shared savings model in the proposed ACO rule to a population-based payment model, officials said. In other words, there would be a single price up-front for the health care services needed by a specific group of people, along with a reduction in fee-for-service payments.

But officials said it would not be the same as capitation, a practice in managed care in the 1990s in which doctors received a set amount of money per patient and were paid in advance.

The pioneers would also have higher levels of shared savings and higher levels of risk than the ACOs as currently proposed in the shared savings program. They could be allowed to move to the population-based model in their third year of being a pioneer, if they have shown specified levels of savings.

For the providers lacking expertise and resources, CMS invited comments on a proposal to give them access to upfront money to create ACOs. The undetermined sum of money would come from "early access" to the savings the ACO provided to the Medicare program. Monthly payments for each Medicare beneficiary would go to the organizations and ACOs would have to detail to Medicare how they plan to use the money.

In its announcement, CMS acknowledged that early comments on the ACO proposed rule indicate many providers lack the capital needed to pay for becoming an ACO. Comments on the proposal are to be submitted by June 17.

In its third initiative, CMS will convene four free learning sessions in 2011, the first as early as June, to help the executive leadership teams from existing or emerging ACOs acquire the expertise to form ACOs.

CMS Administrator Donald M. Berwick said, "We feel we're on schedule," when asked whether contracting with ACOs would begin Jan. 1, as agency officials have previously stated.

Berwick Praises Comments

Berwick called the many comments on the ACO proposal published two months ago "good news" despite the flood of negative reactions. He also denied that the moves announced in effect represent a revamping of the ACO program in response to complaints that as proposed they are unworkable because of the upfront costs involved and some 65 measures with which they must comply to ensure quality care.

Berwick said the agency is also conducting feedback sessions with providers to get the right balance between regulations to ensure quality and efficiency and avoid onerous demands that deter participation and savings.

Asked to what extent the 30 organizations are cutting-edge systems such as the Mayo Clinic, Cleveland Clinic, and Geisinger Health System that had said they would not seek ACO status, a CMS official said, "We're not necessarily just looking at leading-edge organizations. There are a lot of physician-based groups that we think will be ready to take advantage of this model." The official added that "pioneers will be paid on what we're calling a population-based model—where they will see an upfront block payment per person, along with a reduction in fee-for-service payments."

Grabert of the hospital association said that CMS made a positive step forward with the initiative and clearly is trying to be responsive to concerns from providers. But hospitals have many concerns with the proposed rule that weren't addressed, she said, and they would affect both large, highly organized hospitals that might be "pioneer" candidates as well as smaller hospitals with worries about capital investments.

The American Medical Association in a statement said CMS is taking a step in the right direction but more is needed to ensure all physicians who want to take part in an ACO can do so, no matter how small the practice. J. James Rohack, immediate past president of the AMA, said that 78 percent of office-based doctors work in practices with nine physicians or less.

"The benefits of this new care delivery model cannot be fully realized unless physicians in all practice sizes can be involved," he said. The AMA has encouraged CMS to provide help for doctors in the form of start-up capital and small business loans to meet the ACO startup costs.

One afternoon with stakeholders, Berwick was asked about the role of home care and mental health in the ACOs. He said the intent of lawmakers was to focus on primary care in formation of ACOs but he also believes ACOs should be reaching out to those other sectors of health care.

Officials with AARP issued a statement praising Medicare for its announcement. "The opportunity to pilot new and innovative models of care is precisely why AARP supported creating the Innovation Center," said David Certner, legislative policy director. "The pilot programs will allow a range of providers to form ACOs and test new payment models, whether they are integrated medical groups with a history of care coordination, small physician practices or hospitals."

By Jane Norman, CQ HealthBeat Associate Editor

May 19, 2011 -- Reaction was mixed to a final rule Health and Human Services officials announced that triggers state reviews of health insurance premium increases of 10 percent or more—a regulation that is largely the same as the proposal the agency issued in December.

The advocacy group Health Care for America Now praised the rule, saying it will bring an end to outrageous premium rate hikes and shine a light on previously secret data. "We encourage states to step up and aggressively scrutinize proposed rate hikes and provide consumers and businesses much-needed relief from price gouging," said Ethan Rome, executive director, in a statement.

But a consumer group said that not enough information was being demanded from health insurers, while the insurance industry remained unhappy that there's not more focus on the underlying drivers when it comes to health care costs.

The final rule preserves the role of states as the main entities responsible for analyzing whether proposed health insurance premium increases are "unreasonable," as required by the health care law (PL 111-148, PL 11-152).

The law did not give HHS the power to turn down rate increase proposals. But it did increase transparency and scrutiny in terms of the forms that insurance companies will have to complete explaining their increases. The forms will be posted on the Internet for public viewing.

That is not enough detail, though, said the group Consumer Watchdog. It said the rule will let states choose to a great extent how much information to make public in a rate filing. "By not requiring full transparency of the data insurers use to justify rate hikes, the rule does not allow the kind of public scrutiny necessary to pressure insurance companies into lowering unreasonable rates," it said.

America's Health Insurance Plans, which represents the insurance industry, found other faults with the final rule. Karen Ignagni, president and CEO, said in a statement that the public debate needs to be enlarged to understand the quickly rising cost of health care.

"Health plans are doing their part to restrain health care cost growth by partnering with providers across the country to change payment models to promote and reward safe, high-quality, cost-effective care," she said.

Ignagni also said the industry objects to "arbitrary" thresholds for rate review but agrees with HHS that rate regulation should be left in the hands of states.

Unchanged from the proposed rule is the requirement that insurers that want rate increases of 10 percent or more for non-grandfathered individual and small group plans will have to publicly disclose the proposed increases and the insurer's justification for it.

And HHS, as in the proposed rule, will serve as a backup for states that either don't have the authority under their own state laws or the money to effectively analyze premium hike proposals.

Perhaps the biggest change is that the final rule gives states some more time to beef up their review systems. The new regulation will apply to premium rate increases insurers file beginning Sept. 1, rather than July 1 as was originally proposed.

In addition, after Sept. 1, 2012, the 10 percent standard will be replaced with a state-specific one, using data on trends and costs specific to each state. The proposed rule also envisioned a temporary 10 percent standard.

States are eligible for grants to help improve their rate review processes.

Steve Larsen, director for the Center for Consumer Information and Insurance Oversight, said HHS also will begin taking comments on whether health insurance policies sold by associations for individual and small group coverage should be included for rate review. In some states, such associations are exempt from oversight.

"Our inclination, frankly, is to make that expansion," Larsen said in a conference call with reporters. He said many regulators suggested to HHS that associations be included.

The rule also adds a requirement that states have some kind of mechanism for public input on premium increases, he said.

Reaction from the Democratic author of the health care law was positive. "This new provision will help prevent unjustifiable insurance premium rate hikes that hit millions of Americans too hard," said Senate Finance Chairman Max Baucus, D-Mont. "Health reform puts consumers in the driver's seat when it comes to insurance policies and ends an era of insurance company abuses."

Rep. Rosa DeLauro, D-Conn., said her state fought a 20 percent increase in health insurance premiums proposed by Anthem. "This regulation will help to prevent health insurance companies from trying to implement outrageous premium increases and take advantage of American consumers," she said.

By Jane Norman, CQ HealthBeat Associate Editor

May 18, 2011 -- As state legislatures near the end of their sessions, many lawmakers are still struggling with whether to approve measures to set up health-benefits exchanges created under the health care law—and it appears almost certain work in many states will extend into 2012.

While a few states have enacted legislation and others may be nearing final action, many others are torn by differing opinions among politicians, health care providers and consumers about what an exchange should look like or how it should function.

"I think they are finding it difficult to reach consensus," said Joy Johnson Wilson, health policy director for the National Conference of State Legislatures. "Certainly people here underestimated how hard it would be. I always thought it would be a two-session thing."

Fewer than half of the states will have enabling legislation in place at the end of this year's legislative sessions, Wilson predicted. The rest likely will continue working through interim committees ahead of their 2012 sessions.

Meanwhile, the National Association of Insurance Commissioners (NAIC) continues work on draft white papers tackling difficult issues surrounding exchanges, such as governance and the health care navigators, which are are entities that conduct public education activities.

An NAIC subgroup on exchanges is scheduled to have a conference call to discuss the status of several exchange-oriented white papers, which are expected to be used by states as models for legislation. The health care law also calls on the Department of Health and Human Services to consult with NAIC, among other entities, as its own policies on exchanges are developed. A proposed HHS rule on exchanges and other elements key to setting up the new marketplaces is eagerly awaited by state officials. HHS officials have said it would be out this spring.

While some of the tension on the state level is due to Republican dislike of the health care law, Wilson said the disputes really are particular to each state and have to do with their distinct cultures and histories. Sometimes it's a disagreement over what committee will get to handle the exchange bill or who will sit on the boards overseeing the exchanges.

In some cash-strapped states also preoccupied with redistricting, the exchanges may not be much of a priority right now.

The launch of exchanges is required under the law (PL 111-148, PL 111-152) by Jan. 1, 2014, though Wilson said she has doubts whether that deadline can be met. States are supposed to have their exchanges in place by 2012 or the federal government is required to step in and establish exchanges for them.

Some of the problems are illustrated by a stalled bill in North Carolina. House Republicans have been pushing a bill creating a Health Benefits Exchange Authority but it got snagged amidst objections from both consumer groups and advocates of limited government, the News & Observer of Raleigh reported.

It's uncertain whether the state Senate will take up the legislation. If it does not, the General Assembly will have just six weeks in a short session in 2012 to enact the bill and apply for a federal grant by June 30, 2012, the newspaper said.

On the other hand, Colorado lawmakers earlier this month approved and sent to Gov. John W. Hickenlooper legislation that would establish a framework for an exchange overseen by a nine-member board there. Hickenlooper is expected to sign the bill any day.

Wilson said Hawaii Gov. Neil Abercrombie is expected to soon sign an exchange bill there. It's still possible that Rhode Island, Connecticut, Illinois and Missouri will act this year, she said.
California was first, with its exchange bill signed into law in 2010. And Wilson said Louisiana is the only state that she knows of that has notified HHS that it won't be creating its own exchange. Others may well be unable to produce a state-governed exchange but that's not yet clear.

Plenty of attention is focused on the states. The Blue Cross Blue Shield Association issued an analysis this week saying that states should implement competitive exchange models that maximize both choice and competition for consumers. The insurer recommended that states move forward to establish their own exchanges rather than the federal fallback.

"If the federal government does step in to implement an exchange in a state, it will creative duplicative and conflicting regulatory functions that will confuse consumers," said the health insurer. "For example, who would oversee appeals and grievance processes?"

The association also recommended that all qualified health plans meeting federal health law standards should be available on an exchange, rather than states picking and choosing among plans, and that premiums continue to be regulated by state insurance commissioners.

By Jane Norman, CQ HealthBeat Associate Editor

May 19, 2011 -- State insurance commissioners are treading carefully as they work to define the roles of those who sell health policies and the people who will educate consumers about insurance when the health care law goes into effect.

A subgroup of the National Association of Insurance Commissioners (NAIC) approved a draft "white paper" that tries to spell out some of those definitions in an effort to help state legislators create their health benefits exchanges.

But it's a tricky task for the state regulators, and one that's already provoking disputes among state lawmakers working on legislation creating their exchanges.

In a discussion during a conference call and in comments submitted for the paper, it's clear insurance brokers and agents remain deeply worried about intrusions on their traditional turf when individuals and small businesses start buying their insurance through the new state exchanges in 2014.

The exchanges represent a potential vast new market of millions of customers who will get coverage under the law. And brokers already have suffered one defeat when it comes to preserving their livelihoods, under a separate HHS regulation on medical payouts created by the law.

The insurance salespeople want the educators—or "navigators," in the parlance of the health care law—to be subject to state regulations, licensing and oversight, says a comment letter to NAIC from the Independent Insurance Agents and Brokers of America.

Any person, whether a traditional salesperson or a navigator, should have to get an insurance producer license to order, sell, solicit or negotiate insurance, offer advice, or enroll people or businesses in plans, they say.

The advocacy group Families USA, though, says in a paper analyzing the issues that navigators will need training different from that of producers, and "today's licensure requirements for brokers or agents are not the appropriate vehicle to ensure navigators' competency."

As for NAIC, it appears to be sure that it wants to preserve the role of those who sell insurance, or producers, as they are known in state law. "Producers Will Play a Crucial Role in the Success or Failure of an Exchange," says one heading in the white paper.

"Producers have a significant relationship of trust with the individuals covered by both the individual market and the small employer insurance market," the paper says. Those producers who understand the exchanges and how they work can increase public awareness of the exchanges and step up traffic to them, the paper adds.

The NAIC white paper now will be forwarded on to a larger NAIC committee, where it's expected to undergo some revisions again, and eventually will go to the full membership for approval. Regulators also are awaiting HHS regulations on navigators and other exchange details. The regulations are expected in June or July.

Maryland Insurance Commissioner Beth Sammis suggested during the NAIC conference call that the white paper be clarified so that it describes the navigators and the producers as having complementary roles, rather than an "either-or" description.

And Kansas Insurance Commissioner Sandy Praeger said that she envisions the navigators as similar to states' Senior Health Insurance Information Programs, which use trained volunteers to help seniors understand their Medicare health insurance choices.

The health care law (PL 111-148, PL 111-152) specifies that each exchange must award grants to navigators whose duties will include conducting public education activities, distributing "fair and impartial" information on enrollment in health plans, "facilitat[ing]" enrollment into plans and providing referrals for consumers with complaints.

Navigators may include trade, industry or professional groups; unions; chambers of commerce; licensed insurance agents; or other groups, as long as they provide fair and impartial information, the white paper says.

But navigators can't be health insurers, and they can't receive compensation directly or indirectly from insurance companies in connection with enrolling consumers in plans.

Producers, on the other hand, have long been defined and regulated in state law and generally include individuals or health insurers who sell, solicit or negotiate contracts, and the term is used in many states to define both agents and brokers, says the white paper.

The white paper says that the health care law doesn't really distinguish the roles of producers and navigators, and states will need to evaluate how each group should be regulated.

NAIC says the issues include:

• How will the HHS regulations on exchanges affect the oversight and roles of producers and navigators?
• Should states license or certify navigators?
• Who will establish the educational and continuing education for navigators?
• How will navigators be held accountable for errors?
• Are navigators expected to help people enroll in public programs like Medicaid?
• What funding sources will exchanges use for navigator programs?

The NAIC is still expected to take up separate white papers on exchange issues including governance, financing and adverse selection.

By John Reichard, CQ HealthBeat Editor

May 20, 2011 -- House Budget Committee Chairman Paul D. Ryan's Medicare overhaul plan is almost surely dead. But its core concept—having seniors select their Medicare coverage from a menu of competing plans and giving them a set payment to help defray premium costs—surely is not.

An overhaul based on what's called premium support would end Medicare as we know it, and that makes it too risky for lawmakers to attempt before the 2012 elections. But the idea is hardly novel. It's how Medicare administers its prescription drug benefit, and it's the way insurance exchanges will help people without coverage pay their premiums under the health overhaul law (PL 111-148, PL 111-152).

Some leading voices in health policy assert the Ryan plan can be reworked to give seniors more help to cover the cost of premiums, keep traditional Medicare as an option and, improbable as it may seem, win Democratic support.

The next time Congress considers revamping the program in a less politically charged environment—perhaps in 2013—premium support could be the leading option touted by health policy professionals in urging lawmakers to act.

"Ryan's critics correctly argue that his version of premium support, passed by House Republicans, would ultimately end traditional Medicare and likely cause many seniors to pay considerably more for health care than the current system," former Congressional Budget Office (CBO) Director Alice Rivlin blogged May 16 in the Huffington Post.

But Rivlin, a Democrat, said "it would be a serious mistake for health care reformers to demonize the concept of premium support without recognizing that a better constructed version of the same idea could attract support from many Democrats."

How It Would Work

Premium support aims to save money in two ways: through competition forcing providers to hold down the price of care and deliver it more efficiently, and through controls setting how much financial help seniors get to pay premiums. Limiting subsidies will prod Medicare enrollees to find efficient plans, boosters say.

The Ryan plan would hike Medicare premium subsidies each year by no more than the increase in the Consumer Price Index—typically well below annual inflation for medical costs. Over time, the plan would reduce the growth in Medicare spending. But a CBO analysis projects that under Ryan's plan, in 2030 Medicare enrollees would pay more than two-thirds of the cost of their Medicare-covered services rather than about a quarter of the cost if the program stays as is.

House Ways and Means Committee Chairman Dave Camp, R-Mich., says he has no plans to move Ryan's proposal.

That hasn't quieted talk in health policy circles about how to make premium support work. The topic was on the minds of influential analysts who gathered May 16 at the American Enterprise Institute to dissect the devastating annual trustees' report on Medicare's fiscal outlook. The report estimated that Medicare's hospital trust fund would go broke by 2024.

University of Minnesota professor Roger Feldman proposed a premium support structure in which all Medicare plans would bid on a standard benefit package. Private plans and traditional fee-for-service Medicare would be included. "The government would take the lowest bid from a qualified plan in each market area, and that would become the level of the government's premium support," Feldman said. "Plans could offer more benefits if they wanted for an extra beneficiary premium."

In contrast, Ryan's plan would offer only private insurance. "We would retain fee-for-service Medicare," Feldman said. "First of all, private plans won't serve all regions of the country, unless, I would say, they are bribed to do so. It was only a few years ago that private plans became available in all counties of the United States, and they remain so only because they're paid up to 40 percent more than fee-for-service Medicare in some areas. Second, fee-for-service is less costly than private plans in parts of the country, because it has certain advantages, including the government's power to set prices." Finally, Feldman added, some people like fee-for-service Medicare, and would pay extra for it.

To be sure, premium support has plenty of skeptics in the policy world, including among its former advocates. Henry J. Aaron of the Brookings Institution, who urged a premium support overhaul of Medicare in the 1990s, says he now doubts that regulations can be established to help seniors easily compare plans. He also questions whether seniors could make good plan choices. Aaron says the Independent Payment Advisory Board, established by the health law to control Medicare spending, should be tried first.

But Rivlin, Feldman and former Medicare administrator Gail Wilensky say premium support can work by retooling the Ryan plan with bigger annual increases in premium subsidies. They also cite the benefit of retaining traditional Medicare as an option. Feldman said his plan would shave 8 percent off annual Medicare spending, and twice that if current "Medigap" coverage picking up out-of-pocket Medicare costs was no longer sold.

With numbers like that, members of Congress may not find premium support quite so threatening—after the next election.