By Jane Norman, CQ HealthBeat Associate Editor

November 14, 2011 -- With its decision to hear arguments on the constitutionality of the health care overhaul, the U.S. Supreme Court swung open the door to a range of outcomes, any of which could have an enormous impact on federal policy—whether or not the law is left intact.

Whatever the landmark decision by the high court, it will come by June 2012, with Congress still in session, the Department of Health and Human Services (HHS) deep into implementing the law and states finishing the establishment of the health insurance exchanges that are key to bringing health insurance coverage to millions of Americans.

If the law is kept, doubts about it will finally be quashed and the federal and state government paths to full implementation will be cleared. If it's hobbled in any significant way, policy shifts might have to be made by lawmakers or HHS, and quickly. And if it's killed entirely, federal health policy will be thrown back to pre-overhaul days.

The law's requirement that every American have health insurance has been at the heart of the many lawsuits filed by the law's conservative opponents, one of which the high court said it will consider. Whether or not that individual mandate is constitutional remains central to the challenge filed by 26 states, the National Federation of Independent Business and two individuals.

The court could have simply taken up that question. But the justices traveled further, ordering arguments on not just the mandate, but also whether that insurance requirement can be severed from the rest of the law (PL 111-148, PL 111-152).

Their broadening of the arguments might mean the entire law would be struck down if the mandate is tossed. Or the mandate could just be separated from the consumer protections designed to ensure access for people in the individual and small-business markets. The Obama administration and health insurance industry officials have repeatedly warned that severing those protections would throw markets into turmoil. Without the mandate, insurers say, they wouldn't have the increased customer base necessary to pay the costs of such new protections as requiring insurers to cover people with pre-existing conditions.

Justices also somewhat unexpectedly said they will consider the expansion of Medicaid to millions of uninsured Americans and the states' viewpoint that they are being unfairly coerced into a new version of their longtime partnership in the federal-state program for the needy. Without the Medicaid mandate, it's unclear how those Americans who would qualify under the law's new eligibility rules would be covered.

And the court could just decide that it's not yet time to tackle the health care law because of a tax law called the Anti-Injunction Act (PL 72-65). That law says legal challenges to taxes can't take place until the tax is actually collected, and the penalty for not having insurance won't be levied until 2014.

That issue was first raised in a substantial way by the Court of Appeals for the 4th Circuit, in a decision tossing a suit against the law brought by Liberty University of Lynchburg, Va. An appeal by Liberty is still pending at the high court. But the justices decided they wanted to hear arguments on that question, even though it wasn't included in the original multistate suit.

Stakeholders React

The numerous possibilities at hand were clearly contemplated by stakeholders in their reactions following the court announcement.

Florida Attorney General Pam Bondi, whose state is leading the 26-state suit against the law, said that opponents will argue the entire law must go and a decision should not be put off until after the penalties are collected.

"We look forward to presenting oral argument and defending our position that the individual mandate is unconstitutional, that the entire law fails if one part fails, that the Anti-Injunction Act does not apply, and that Medicaid's expansion is unlawfully coercive," Bondi said in a statement.

HHS Secretary Kathleen Sebelius told reporters that the administration remains confident the law will be upheld and the timing on the Supreme Court oral arguments is good because it follows a series of appeals court decisions. All but one have held the law is constitutional. It is "important that we put to rest once and for all [the thought that] maybe the law will disappear," said Sebelius.

Rep. Pete Stark, a California Democrat and one of the authors of the law, said a decision in the law's favor will end GOP calls for repeal and let the law smoothly roll forward.

"I'm looking forward to a Supreme Court ruling that will force Republicans to join Democrats in governing instead of continuing their political grandstanding," Stark said in a statement.

Senate Judiciary Chairman Patrick J. Leahy, D-Vt., framed it as a question of congressional powers. "Most appellate courts have upheld the constitutionality of this historic law, and when the Senate voted to pass the Affordable Care Act, it also voted specifically on its constitutionality," Leahy said in a statement. "I hope the Supreme Court will defer to Congress in addressing this national problem."

What's important is settling the questions at hand quickly, GOP health care leaders opposed to the law said. Ways and Means Chairman Dave Camp and Wally Herger, chairman of the panel's Health Subcommittee, said in a joint statement they were "pleased that the court is acting swiftly to address the issues in this case so that the families, employers, and states can have some certainty going forward."

Representatives of patient advocacy groups who have filed court briefs supporting the law, such as the American Cancer Society and its Cancer Action Network, the American Diabetes Association, and the American Heart Association, said a fast decision is needed.

"We are optimistic that timely review by the nation's highest court will help to mitigate confusion and allow implementation to continue in a way that supports and strengthens provisions of the law that enable patients with chronic diseases to access quality, affordable health care," they said in a joint statement.

But some conservatives urged states to resist implementation and wait for the court to act.

"Too many questions remain about what portions of the law could be struck down, and every dime spent on the implementation of the law is one that taxpayers will never get back," Benjamin Domanech, a research fellow at the right-leaning Heartland Institute, said in a statement. "Responsible legislators, administrators, and governors ought to remain patient and see what the court decides before proceeding."

Some of the law's advocates differed. More than a dozen states have passed legislation to create exchanges, and several governors have signed executive orders, the Commonwealth Fund said in a statement. Some 89 percent of health opinion leaders said in a recent fund survey that it's important for the law to move ahead, the fund's leaders said.

Medicaid Involvement a Surprise

Particularly worrisome for the law's supporters was the injection of the Medicaid issue into court deliberations, since it was allowed to stand by a federal appeals court that struck down the individual mandate. "Since Medicaid was enacted in 1965, Congress has expanded the program many times without objection from the court," Ron Pollack, executive director of Families USA, said in a statement. "The federal government pays for the majority of Medicaid's expenses, and it is reasonable that it establish the ground rules for the program's operation."

The Medicaid issue is also unique in that it doesn't figure in any of the other legal challenges to the law. While not getting as much attention as the individual mandate, it has been very important to states pursuing the case.

"Given the substantial implementation costs associated with this 2,700-page law—and the unconstitutional mandate that it will impose on all Americans—we are pleased that the Supreme Court has moved quickly," said Texas Attorney General Greg Abbott.

The court's five and a half hours of arguments on the case also apparently will include two justices who different groups have said should recuse themselves from deliberations.

Elena Kagan, the former solicitor general, should not hear the case because she was involved as an administration official, Republicans say. And Clarence Thomas' wife was involved in lobbying against the health care law, Democrats say. Neither Kagan nor Thomas indicated in the order that they would step aside, all nine justices to decide the cases.

By Nellie Bristol, CQ HealthBeat Associate Editor

November 17, 2011 --Premiums for employer-based family health insurance rose 50 percent on average between 2003 and 2010, with employees paying a higher percentage of the costs, The Commonwealth Fund found in a recent report.

Total premiums in 2010 averaged $13,871 for family coverage. The average annual employee premium share was $3,721 in 2010, compared with $2,283 in 2003.

In addition, insurance costs have risen three times faster than wages. By 2010, the report says, there were 23 states in which average premiums were equal to 20 percent or more of median income for those under 65, compared with just one state in 2003.

"This report reveals that the combination of rapidly rising health care costs and stagnant incomes is putting families in an untenable position," said Commonwealth Fund President Karen Davis.

The report is part of a Commonwealth Fund series on implementation of the health overhaul law (PL 111-148, PL 111-152). It calculates that without insurance market and delivery system changes included in the law, family premiums would climb to almost $24,000 a year by 2020. The report ascribes projected annual premium savings of 1-1.5 percentage points to the overhaul.

A state-by-state analysis shows 2010 premiums ranging from a low of $11,379 in Idaho to a high of $15,000 in New Hampshire and the District of Columbia. "Notably, many states with premiums above the national average have family incomes below the national average," the report says.

In a press call releasing the report, study author Cathy Schoen said the figures include the total costs of health insurance and not just the employee share to illustrate how employers see the costs and how they factor them in to other types of compensation, including wages and pensions.

"Although employees typically don't see the total costs of insurance, the sharp increase in total costs has in effect meant ever less for wages and salaries as businesses trade off wage increases to pay for the rising cost of insurance," Schoen said.

Without an overhaul of our health care system, "families will continue to be forced to trade off incomes for health benefits," producing a dampening effect on economic growth, she added.

While federal health programs tend to attract the most political attention, Schoen said, the private sector is key to making health care more efficient and affordable.

"Overall success of the [health system] reforms will be contingent on public and private stakeholders working together to ensure that markets operate in the broad national interest of better health, more positive health care experiences, and lower costs," the analysis concludes.

By John Reichard, CQ HealthBeat Editor

November 14, 2011 -- It was tempting to completely discount assertions by Premier Alliance hospital executives at a news briefing last week that accountable care organizations (ACOs) and similar programs touted by federal officials are going to produce genuine savings and possibly begin slowly easing the nation's health cost crisis.

Tempting—except they said they were basing their claims on actual savings produced by their own health systems, which are far along in retooling their health care delivery systems to fully adopt the ACO model. And they say they are making those changes in close collaboration with private insurers—and not just because of federal efforts to launch ACOs in the Medicare program.

ACOs are teams of doctors, hospitals, and other types of caregivers that will be paid under the traditional "piecework" fee-for-service system that compensates providers for each and every element of care that they provide. That system rewards quantity—not quality and efficiency—but to begin moving health care toward those two latter goals, ACOs will be given savings and quality performance targets, and their participating providers will get bonuses if they hit them.

Terry Carroll, a senior vice president with the Minnesota-based Fairview health system, told reporters, "We're not doing this as an experiment." In addition to preparing to launch ACOs in Medicare and Medicaid, Fairview is working with private payers such as HealthPartners, Blue Cross, and Preferred One.

Models in which Fairview and insurers share savings from better-coordinated care have already begun to pay off, said Carroll. In the commercial market, Fairview is delivering care for some 250,000 people under shared savings reimbursement. Those efforts reduced hospital admissions by 3,000 in 2011 in the Fairview system, he said. Emergency department admissions also have begun to fall as patients get improved access to primary care that keeps them out of the ER. As patients get earlier, better-coordinated care from doctors, "their demand on the system has actually started to come down." Fairview has been able to take health care costs down by 3 percent to 4 percent, he said.

Fairview gets money when that happens by sharing in savings and also from other bonus payments to participating providers who deliver treatment more efficiently.

Carroll said there are two ways to deal with these lower costs—increase the number of patients one is treating, even if one is treating them less profitably—and "reconfigure assets."

That term suggests reducing staffing and closing hospital beds and other measures to reduce fixed costs from the health care system. But Jan Mathews with the CaroMont Health system in Gastonia, North Carolina, said that doesn't necessarily mean layoffs.

Mathews said her system has reduced emergency department use and that it staffs according to admission levels but that instead of losing their jobs, caregivers may see their roles change from directly providing primary care to care coordination overseeing the care of individual patients.

Still, officials at the briefing emphasized that savings have to come out of the health system and suggested that could mean a leaner health care system. And they said if hospitals and other providers don't get the job done, they face draconian changes in government policy, over which they would have little control and could be more devastating to them financially.

But Blair Childs, an executive with Premier, said that ACOs and similar efforts to improve efficiency fostered by the federal government are going to work because the private sector is also moving in that direction. Medicare is no longer a bastion of fee-for-service medicine pulling providers back into older ways of delivering care—which is likely to drive fundamental change as a result, he suggested. "We're going to hit a tipping point," Childs said. "When we hit a tipping point, we're going to see real change in health care."

An organization that provides various management support services to some 2,500 hospitals nationwide—about 40 percent of U.S. hospitals—Premier is at the forefront of national efforts to form ACOs. It has an "implementation collaborative" consisting of 23 health systems representing 70 hospitals that, in a number of instances, may be ready within the next year or so to offer Medicare ACOs. And Premier also has a "readiness collaborative," which includes another 57 systems representing 250 hospitals that have taken steps to form ACOs but are not as far along.

Several elements distinguish the two groups. The implementation group is more likely to have appointed executives whose specific job is to form and run an ACO and to have developed health IT systems to better manage care and track the health care needs of the local population. It also is more likely to have adopted "health homes," or doctor's offices that are paid to oversee the overall care of patients; and to have partnerships with payers to redesign payment to encourage efficiency and quality.

As the federal government works to develop its Medicare ACOs, officials are taking into account the fact that some organizations are further along in the process. As early as next month, federal officials are gearing up to announce some Pioneer ACOs, groups that will be ready soonest to begin contracting with Medicare.

By Nellie Bristol, CQ HealthBeat Associate Editor

November 14, 2011 -- Health and Human Services (HHS) Secretary Kathleen Sebelius recently did her bit to help President Obama's job-creation effort by announcing $1 billion in grants funded by the health care law that will help add health care workers across the country.

Applications are open to health care providers, local governments, community-based organizations and payers and HHS will give preference to projects that "rapidly hire, train and deploy health care workers," according to a department press release.

Three-year grants, to be issued in March, would range from $1 million to $30 million each. Projects will be evaluated and monitored for improvements to care and cost savings. The project, called The Health Care Innovation Challenge, could allow experimentation with more non-physician care arrangements involving, for example, community health workers and volunteers.

Once the health care law (PL 111-148, PL 111-152) takes full effect in 2014, workforce shortages are expected to be intensified as an additional 32 million Americans receive coverage by 2019.

The grant program aims for a trifecta of Obama Administration goals: increased jobs, health care service delivery improvements and lower health care costs.

The overhaul law was criticized for not including concrete methods for reducing federal costs for health care programs. Instead, it created the Center for Medicare and Medicaid Innovation to oversee and fund pilot and demonstration projects designed to improve care and save money.

The emphasis is on finding successful programs, proving their worth and expanding them as appropriate.

The focus on speed is evident in the current proposal: applicants must be operational or capable of rapid expansion within six months after the grant is awarded. Sebelius contrasted the approach with previous demonstration projects under previous administrations that took three-to-five years to play out before results could be analyzed.

Grants will focus on efforts that deploy workers in new ways. HHS officials mentioned as examples outreach efforts, care coordination and health information technology. Asked if creating more health care workers wouldn't run the risk of increasing costs, Centers for Medicare and Medicaid Services Administrator Donald Berwick insisted the program is "adding the kinds of jobs that add value to health care."

By John Reichard, CQ HealthBeat Editor

November 14, 2011 -- The National Committee for Quality Assurance (NCQA)—an independent industry group that government and businesses rely on to better gauge the quality of health care—previewed a program that it intends to launch next week to accredit accountable care organizations (ACOs).

Purchasers, including Medicare, Medicaid and commercial insurers, are likely to increasingly rely on ACOs to lower costs and improve quality in fee-for-service medicine. Analysts say health care is inefficient and poorly organized under that type of payment system and that ACOs are a way to begin coordinating services and improving quality.

But as doctors, hospitals and other types of providers team up to form ACOs, purchasers don't know if they can deliver. Enter the new NCQA accreditation program.

"Not every group of providers that wants to call itself an ACO has what it takes to accomplish this vital mission," said an NCQA briefing paper on the new program. The rating effort provides "independent evaluation of organizations' abilities to coordinate and be accountable for the high-quality, efficient, patient-centered care expected from ACOs."

NCQA will classify organizations that are accredited under the program as level one, level two or level three. Level three means an organization is most advanced in its capacity to deliver savings and higher quality, and level one mean it is least advanced. But level one will still be a mark of distinction in the marketplace, separating an ACO from other organizations that have no accreditation.

Tricia Barrett, vice president for product development at NCQA, said that initially she expects most accredited groups to be level one or level two. The standards for achieving level three status will be announced next spring.

NCQA officials announced that two organizations have stepped forward to undergo accreditation, and they may be announced as achieving that status the middle of next year. They are the Billings Clinic in Billings, Montana, and HealthPartners in Minneapolis-St. Paul.

Medicare is soon expected to announce ACOs it is contracting with, but just because an organization is approved by Medicare does not confer NCQA accreditation; likewise, NCQA accreditation says nothing about whether an organization has met Medicare standards. However, the standards are expected to be similar, Barrett said.

By Nellie Bristol, CQ HealthBeat Associate Editor

November 18, 2011 -- As part of its efforts to increase the availability of consumer information on health insurance, local plan benefits and pricing details for small businesses are now available on the Web, the Department of Health and Human Services recently announced.

Businesses can compare plan costs and other details by entering their zip code at www.healthcare.org. Establishment of avenues to provide plan information and facilitate comparisons was mandated by the health overhaul (PL 111-148, PL 111-152) in an effort to encourage insurance purchases. HHS is anxious to roll out health law consumer measures to encourage public support for the embattled overhaul.

New details provided on the site by 530 insurers include:

• out-of-pocket limits and average cost per enrollee;
• a summary of cost and coverage with available deductibles, co-pay options and benefits; and
• ability to filter options based on prescription drug, mental health and maternity coverage and other variables such as domestic partner provisions.

In a press release, the agency commented that the small-business market is difficult to analyze and that small employers spend 18 percent more than larger employers for the same coverage.

While the National Federation of Independent Business opposes the health care overhaul overall and is involved in the Supreme Court lawsuit against the measure, Amanda Austin, director of federal public policy for the group, endorsed provision of this type of consumer-driven information. Nonetheless, she said, in looking at the site she found that not all plans had a price per employee posted, which would be the most important detail for small businesses.

"Clearly, they need to grow more on it, but I do think ... for small businesses to be able to come in and put in a handful of information—how many employees you have, where do you live—and then to be able to compute out their private insurance options, it's helpful," Austin said. "I think those are the type of consumer-driven approaches that are going to be useful long term."

It's important for HHS to now publicize the availability of the information through a variety of channels specific to small businesses so that employers know about it. "If they don't know about it, it might as well not exist," she said. It is particularly difficult to get insurance information to small employers, she said, because half of businesses with fewer than 50 employees don't offer coverage and aren't involved in seeking information.

The overhaul provides health insurance tax credits to some small employers, who are exempt from penalties for not offering coverage. The law authorizes a state-based Small Business Health Options Program beginning in 2014 where businesses with fewer than 100 employees will be able to comparison-shop for plans.