By John Reichard, CQ HealthBeat Editor

November 23, 2011 -- President Obama announced his intention to nominate Marilyn Tavenner to succeed Donald M. Berwick as administrator of the Centers for Medicare and Medicaid Services.

Tavenner will serve as administrator on an acting basis during the confirmation process, which would be handled by the Senate Finance Committee. Berwick's resignation is effective Dec. 2. His recess appointment was set to expire Dec. 31.

"Don Berwick did outstanding work at CMS," Deputy White House Press Secretary Jamie E. Smith said in a statement. "It's unfortunate that a small group of senators obstructed his nomination, putting political interests above the best interests of the American people. Marilyn Tavenner is an experienced leader who will build on this incredible record of accomplishment and make Medicare and Medicaid even stronger, and we hope that the Senate will act quickly to confirm her."

It is not clear when the White House would send Tavenner's formal nomination up to Capitol Hill or when a confirmation hearing will be held. Republicans raised such strong objections to Berwick's nomination that he never had a hearing; instead Obama made him CMS administrator through the recess appointment. A Tavenner confirmation hearing could serve as another opportunity for GOP lawmakers to bash the health overhaul law, whether or not they have any strong objections to her taking over Berwick's job.

In an email to HHS staff, Secretary Kathleen Sebelius praised Berwick and said Tavenner has been his partner.

"As the Principal Deputy Administrator at CMS for nearly two years and as former Acting Administrator, she has proved her skill in managing challenges like overseeing the integration of the insurance oversight into CMS and implementing the numerous improvements to Medicare, Medicaid, and the Children's Health Insurance Program,'' Sebelius said. " Marilyn will serve as Acting Administrator after Don's departure, and I know that she will strongly and ably guide the agency at this critical time."

Berwick also sent an email to his staff in which he told them they have "made history together both in implementing the Affordable Care Act and in conducting and improving the crucial ongoing work of our Agency and Department."

The outgoing CMS administrator did not say what his immediate plans are. Berwick is expected to return to his home in Boston and spend time with his family before deciding his next move.

'Smart, Sharp, Fair, Organized'

The 60-year-old Tavenner enjoys a strong reputation as a manager—based both on her career as an executive in the for-profit hospital industry and her tenure as principal deputy administrator at CMS.

Appointed to that post in February 2010, Tavenner has basically served as Berwick's number two. She has overseen the largely successful implementation of the huge volume of regulations that are being issued under the health care overhaul law (PL 111-148, PL 111-152).

Tom Scully, who ran the Federation of American Hospitals before the George W. Bush administration appointed him CMS administrator, said in a profile of Tavenner earlier this year that she was highly regarded among fellow executives. "She's just very smart, sharp, fair, organized," Scully said. "Unlike a lot of people in government, she actually had to run health care day to day for many years."

Scully predicted then that Tavenner would probably be confirmed if she were eventually nominated to head CMS because she is a pragmatic moderate. She has the backing of Virginia Sen. Mark Warner, a centrist Democrat.

Tavenner has a strong knowledge of Medicare and Medicaid reimbursement policy. After her HCA career, she became Virginia's secretary of health and human resources in Democratic Gov. Tim Kaine's administration. She oversaw a dozen health agencies, including the state's Medicaid program.

As overseer of Virginia's Medicaid program, Tavenner earned praise from advocacy groups for protecting patient care during a period of plunging state revenues. But she and Kaine got in hot water late in her tenure for allegedly suppressing an advisory panel's findings that 800 children with serious mental illnesses would be left without adequate care if the state went ahead with budgetary plans to close two facilities that provided psychiatric care.

Tavenner and Kaine have declined to discuss the matter.

Tavenner's business background and centrist politics suggest she won't be the target that Berwick was for opponents of the health care law.

Berwick's past statements praising the British health system made him a high-profile target but there are no indications that Tavenner has such statements in her background.

A nurse at the start of her career, Tavenner rose steadily through the ranks at Hospital Corp. of America. She managed patients, then a nursing unit, then a hospital, then two hospitals, then a hospital division and ultimately the chain's national ambulatory care unit.

Jay Grinney, CEO of the rehabilitation chain HealthSouth, said when he first became Tavenner's boss at HCA she was the CEO of Chippenham hospital in the southern part of Richmond, Va. He put her in charge of creating a merged doctor network with HCA's nearby Johnston-Willis facility. The two facilities had different medical staffs, cultures, and markets. Company insiders doubted she could pull it off. But Tavenner worked through the issues and successfully brought together the two sites. "More than anything it was her tenacity," Grinney said.

"She's tough. She's very tough," he said. "She's just someone who never gives up."

By Dena Bunis, CQ HealthBeat Managing Editor

November 21, 2011 -- Karen Davis, who has been a fixture in health policy in Washington, D.C., and New York for decades, recently announced that 2012 will be her last year as president of The Commonwealth Fund.

"I'll have been there 20 years," Davis said in an interview. "It seems like a good point to go at the end of 2012."

Davis has worked at the Brookings Institution, has lectured at Harvard University and was a deputy assistant secretary for planning and evaluation at the Department of Health and Human Services during the Jimmy Carter administration. In 1980 she became the first woman to head a U.S. public health service agency when she became the administrator of the Health Resources Administration. After 11 years as a professor and department chairwoman at Johns Hopkins University, Davis joined The Commonwealth Fund in 1992 and became its president in 1995.

The Commonwealth president said she "feels good" about the health care overhaul that her organization fought for. And equally important, she said, are some of the concepts for changing the health care delivery system that the Fund has championed on her watch. She ticked off a number of such ideas, including the patient-centered medical home, accountable care organizations, and bundling of hospital and post-acute care payments.

Davis seemed most proud of the information and databases The Commonwealth Fund has collected and built, saying that these tools "made people aware that we didn't get the kind of performance that we can expect from the health care system." She said she believes "one of the reasons the fund is so well regarded is, people know they can trust the information that we put out. It's sound and it stands up to scrutiny."

Just because the health overhaul is now law (PL 111-148, PL 111-152), Davis doesn't believe the fund's work to fight for expanded access to quality health care is done.

"In some ways, health system transformation is still in its infancy," she said. "While health care leaders, hospital leaders and others in the health care sector know they have to change and want to change and know the direction they want to do in, how to really change is still a bit of a formidable obstacle," she said. Making the change happen is going to take more good information and a push to make sure that some of the "shining examples" of the best delivery systems go from being 10 percent of what's out there to 90 percent.

Beyond that, she said, remains the problem of health care costs. While she takes some comfort that costs as a percentage of gross domestic product are dropping, she said, there's a lot of work to be done to continue to eliminate duplication of care and waste.

"That's the challenge over the long term," Davis said.

Davis has no intention of putting her feet up and retiring at the end of next year.

"I certainly plan to be active," she said, "whether service on commissions or informational advice or going back into academia and speaking and writing."

And all to one end, she said: "Ensuring that everybody who needs health care gets it."

By Jane Norman, CQ HealthBeat Associate Editor

November 23, 2011 -- The United States spends far more on health care than many other developed nations yet all that money doesn't necessarily mean the quality of the care excels, says a report on international health released by the Organization for Economic Cooperation and Development (OECD).

Hospital services cost much more in the United States and pharmaceutical prices are much higher compared to other countries, says the study by the Paris-based think tank. Yet there are fewer practicing physicians per 1,000 population, fewer doctor consultations and shorter hospital stays in the U.S. than in other nations—and more CT scans, knee replacements, and Caesarean sections.

But when it comes to beating cancer, the United States shines, with breast cancer and colorectal cancer survival rates topping the international charts. On the other hand, there are comparatively high hospital admission rates for preventable conditions like asthma, diabetes and hypertension.

"The U.S. health system is very good at providing good quality cancer care and actually very poor at providing anything to do with primary care," Mark Pearson, head of the OECD health division in Paris, said in a briefing with reporters.

The perspective on health care costs in the United States as opposed to other nations comes just two days after a congressional deficit panel failed to come on agreement on a plan to trim the deficit, including spiraling entitlement costs for public health programs. Under the debt law, the next step will be an automatic cut in Medicare provider payments of up to 2 percent per year starting in 2013.

The OECD said in its report that U.S. health spending was $8,000 per capita in 2009. That's two-and-a-half times higher than the average for the 34 nations that belong to the group, including such European countries as Germany, France, the United Kingdom, and Italy, as well as some South American and Asian nations like Chile and Japan.

The U.S. "even spends twice as much as France, for example, a country which is generally accepted as having very good health services," says the report. Some nations in the study have universal health care primarily financed by governments while others have multiple payer systems akin to the United States system.

Pearson said that the U.S. is an "absolutely massive outlier" compared to spending per capita in other nations.

The United States spends 17.4 percent of gross domestic product (GDP) on health care, compared to 12 percent in the Netherlands and an average of 9.6 percent for other OECD nations, said Pearson. However, globally, health care is rising as a share of GDP for many countries, he said.

Medicare and Medicaid take up more of GDP in the U.S. than the average for public programs in OECD countries, he noted. "This is not just a story about private spending in the United States being very high," he said.

Richer countries do spend more on health, said Pearson. But there is a "huge difference" in health spending even looking at the United States in comparison with countries with similar incomes per capita such as Switzerland, he said.

More is spent on hospitals, physicians and dentists as well as administrative costs though other countries with multiple payers may be similar in administrative costs, he said.

In terms of specific procedures, the U.S. pays the highest prices in the study for appendectomies, normal childbirths, Caesarean sections, coronary artery bypass graft, hip replacement, and knee replacement, said Pearson.

Yet there are 2.4 practicing physicians per 1,000 population in the U.S. compared to 3.1 per 1,000 in the 34 OECD countries on average. "It's actually very low in the United States," said Pearson.

There are 3.9 doctor consultations per capita in the United States compared with 6.5 per capita in the other countries on average. And there are 3.1 hospital beds per 1,000 population compared to 4.9 per 1,000 in the foreign countries, he said.

Yet there is "an awful lot of expensive diagnostic equipment" used more frequently than in other nations, said Pearson, such as MRI units and CT scanners.

For cancer, though, the United States is providing "the very best care" judging from survival rates, he said. The five-year survival rate is the highest for all the countries studied, and the five-year rate for survival of colorectal cancer is bested only by Japan.

By Nellie Bristol, CQ HealthBeat Associate Editor

November 23, 2011 -- Of the $123 billion in Medicare cuts from 2013 to 2021 that the deficit reduction sequestration provisions call for, the majority would come from provider payments, with a 32 percent share coming from hospital inpatient reimbursements, health consultant Avalere Health says in a new analysis.

The debt reduction law (PL 112-25) limits cuts to Medicare to no more than 2 percent a year. Other hard-hit Medicare payments would include those to group insurance plans, 15 percent of total cuts, and 12 percent of the physician payments. Hospital outpatient payments would make up an 8 percent share of the decrease and skilled nursing facilities would make up 7 percent. The figures are based on a 2 percent reduction of each service's projected payments through fiscal year 2021.

Absent a deficit reduction plan by Jan. 15, Congress must impose across-the-board cuts in federal spending in a process known as sequestration. Total federal budget reductions of $1.2 trillion would be required starting January, 2013. Medicaid, the Children's Health Insurance Program, Medicare Part D low-income subsidies and catastrophic care subsidies would be exempt. Also spared is the Qualified Individual Program, which funds Part B premiums for low-income Medicare beneficiaries, and health overhaul exchange premium subsidies. However, exchange cost-sharing subsidies would be cut.

While providers would take a hit under the scenario, unlike some other budget reduction plans, there would be no reduction in Medicare benefits.

Dan Mendelson, CEO of Avalere Health and a former Clinton administration official, said the sequestration scenario probably would be altered by Congress. "It's unlikely that this limited construct will ultimately be allowed to stand," he said in statement. "Real deficit reduction," he added would involve payment reductions, revenue growth and benefit reductions and continued delivery system reforms.

"Given the magnitude of these issues, Congress will need to use all of the tools at its disposal, but this type of courage doesn't usually materialize in an election year," Mendelson said.

By Jane Norman, CQ HealthBeat Associate Editor

November 21, 2011 -- An announcement that the U.S. Supreme Court will hear oral arguments in the cases challenging the health care law included a surprise that could steal the show: the justices' decision to consider the law's sweeping expansion of Medicaid.

That issue could go well beyond health care and break new ground in the often-rocky relationship between the federal government and the states.

The 26 state attorneys general and governors who lodged the suit are arguing that the federal government is effectively "coercing" them by threatening to withhold all Medicaid money unless the state agrees to a costly new spending arrangement set out in the health care overhaul.

Such threats to cut off funding are a primary means by which the federal government imposes obligations on the states—from civil rights in state universities to speed limits on state highways. Were the high court to find this practice potentially coercive, that could raise questions not only about Medicaid, but also about the future of dozens of federal mandates imposed on states using federal funds.

The high court last aired this debate in 1987, when South Dakota challenged the federal government's power to withhold a small portion of transportation funds from states that refused to raise their drinking age to 21 in South Dakota v. Dole.

South Dakota lost. But Chief Justice William H. Rehnquist, in writing for the majority, said that "in some circumstances, the financial inducement offered by Congress might be so coercive as to pass the point at which 'pressure turns into compulsion.'" That point has been reached, the states contend. And some legal experts say the push for a ruling on Medicaid could have far-reaching consequences.

Simon Lazarus, a health law supporter and counsel for the National Senior Citizens Law Center, says the court may be taking up the Medicaid question as a courtesy to the states. But, he says, conservative jurists have worried about how much leverage Washington has when attaching strings to federal aid to states.

Were the court to accept the states' argument, requirements that states and private companies receiving federal funds cannot discriminate on the basis of race or gender might be thrown into question, Lazarus says.

The Hyde Amendment, which bars the use of taxpayer funds for abortion except in cases of rape, incest or danger to a woman's life, also might be imperiled, he says. "You can imagine the litigation explosion that would occur if the court were to grant this, which is why it's probably not going to."

On Nov. 14, the justices decided they would hold five and a half hours of oral arguments, probably in March, in response to the suits from the states, the National Federation of Independent Business and two individuals.

The health care law mandates that, as of 2014, states provide Medicaid to all children and adults under age 65 with household incomes up to 133 percent of the poverty level. The Congressional Budget Office projected that 16 million people would be added. This would be the most significant change to Medicaid since it was created in 1965. From 2014 to 2016, Washington will pay all of the costs of the newly eligible. The federal share will phase down to 90 percent by 2020.

The states say they cannot afford the extra expense, yet they have no recourse other than to drop out of Medicaid. "Congress attached the new conditions not just to new money but to billions in pre-existing Medicaid funding," the states wrote in a brief to the court. "Congress did so precisely because it knew states could not afford the loss of nearly half of all federal funding, and would therefore capitulate to its demands."

Rulings by lower courts have not agreed. U.S. District Court Judge Roger Vinson, who in January ruled most of the law unconstitutional, wrote that "there is simply no support for the state plaintiffs' coercion argument in existing case law." The Court of Appeals for the 11th Circuit struck down the individual mandate yet left Medicaid intact.

Some scholars back the states' position. James Blumstein, a Vanderbilt University law professor, says states began participating in Medicaid under conditions that have now been significantly altered. States must be able to take part in cooperative-spending programs voluntarily and knowingly, Blumstein says. He recommends that Congress start over and launch a "Medicaid 2.0" that would give states a choice to participate. That would delay but not thwart implementation, he says.

Lazarus says those affected by conditional spending guarantees, such as the civil rights community, will be flooding the court with briefs in the months leading up to March.

By John Reichard, CQ HealthBeat Editor

November 22, 2011 -- The announcement by the deficit reduction panel that it couldn't reach agreement on a legislative package to reduce deficit spending doesn't get lawmakers off the hook to make cuts this year to the popular Medicare program.

While members of Congress may not have to worry about making Medicare cuts in 2012, they likely will have to decide by next month how to trim $25 billion, or considerably more, over 10 years, to offset the cost of must-pass legislation to avoid a 27.5 percent cut in payments to doctors scheduled for Jan. 1. And it's all but certain that most, if not all, of that $25 billion will come out of Medicare.

Under the debt control law (PL 112-25), Medicare provider payments will be automatically cut up to 2 percent per year starting in 2013 now that the deficit panel has not developed a different approach.

"After months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee's deadline," the panel's co-chairmen Sen. Patty Murray, D-Wash., and Jeb Hensarling, R-Tex., said in a statement shortly before 5 p.m.

The American Medical Association (AMA) had hoped the panel would back legislation that, along with slashing deficit spending, would completely scrap and replace the problematic "SGR" (sustainable growth rate) payment formula that requires ever-deeper cuts in doctor reimbursement.

But talk of that happening this year is fading away, leaving lawmakers in a position of having to pass temporary payment matches to head off cuts. Typically each patch adds to the size of subsequent payment cuts under the SGR, which in turn requires even more in the way of spending offsets to enact still more payment patches. Doctor groups hoped that hundreds of billions of dollars in savings from winding down the wars in Afghanistan and Iraq would be tapped by the so-called supercommittee to meet the $300 billion or so 10-year cost of replacing the SGR entirely.

But doing that now as stand-alone legislation is much harder. "My instincts are that that kind of approach works when you are in a bigger deficit reduction environment like the supercommittee," a health lobbyist noted. In other words, the huge cost of scrapping the SGR would be less apparent if it were part of a grand bargain that had the overall effect of reducing deficit spending.

Ironically, waiting to completely eliminate the formula will make the cost of doing so even more gigantic. The lobbyist said that according to one set of projections, passing temporary patches over the next five years and then trying to completely scrap the SGR after that point would double the cost of subsequently eliminating the formula, to $600 billion over 10 years. That figure would not include the many tens of billions of dollars required to enact five years' worth of patches.

"The fiscally responsible action for Congress is to repeal the broken Medicare physician payment formula and stop the frequent short-term fixes and budget tricks that have increased both the size of the scheduled Medicare cuts and the cost of fixing the problem," AMA President Peter Carmel said in a statement. "As recently as 2005 the cost of permanent reform would have been $48 billion, in five years the cost will be $600 billion. Fixing this problem to preserve seniors' health care now and in the future must be a top priority."

Even so, lawmakers appear to be heading towards more temporary fixes. "I would anticipate a doc fix of one or two years," said Julius Hobson, senior policy adviser with the law firm Polsinelli Shughart. The pressure of coming up with pay-fors pushes lawmakers toward shorter-term payment fixes, notes Bill Dombi, a lobbyist with the National Association for Home Care.

Even one year would mean cuts of $25 billion or more over 10 years. So blocking payment cuts to doctors would line up other sectors of health care for possible cuts. Skilled nursing facilities, home health care agencies, rehab hospitals all have been eyed by deficit cutters as potential targets, and lawmakers will look to the list of possible reductions the debt panel has compiled. Another possibility is reducing the payments Medicare makes to acute care hospitals to compensate them for the failure of beneficiaries to pay out of pocket costs.