By Rebecca Adams, CQ HealthBeat Associate Editor

October 27, 2011 -- Medicare beneficiaries will pay standard outpatient care premiums next year of $99.90 per month, $3.50 more than most paid in 2011, Department of Health and Human Services officials said. The deductible for outpatient care will decrease by $22.

The moderate increase is the first rise in outpatient premiums for most Medicare patients since 2008. By law, outpatient premiums are tied to Social Security cost-of-living (COLA) increases, which seniors have not gotten in recent years. Medicare Part B premiums for about three-fourths of beneficiaries do not rise in years when beneficiaries' Social Security checks do not go up.

However, about one-fourth of Medicare patients are in groups that have not been shielded from outpatient premium increases in recent years. Those beneficiaries include new enrollees, higher-income Medicare beneficiaries and patients who also are eligible for Medicaid, the federal-state program for the poor and people with disabilities. The premiums for those patients will fall by $15.50 in 2012, from $115.40 to $99.90.

The premiums for Part B outpatient care are $6.70 lower per month than had predicted earlier this year. The Medicare Trustees had projected that Part B outpatient premiums would be $106.60 in 2012.

One reason why premiums will be lower than expected is because spending growth has been lower than anticipated, Medicare administrator Donald Berwick said on a call with reporters.

Another important factor is related to the fact that now the bulk of Medicare beneficiaries will be getting a premium increase next year, thanks to the Social Security COLAs. So that means any increases in health costs will be spread out over many more beneficiaries and not borne by the one-forth of beneficiaries who aren't shielded from increases in years when the Social Security COLAs don't materialize.

"More people are sharing in the smaller-than-expected increases in costs," said Berwick.

Even though most Medicare patients will face a slight increase in their outpatient premiums, the boost in their Social Security checks should allow those in typical situations to come out financially ahead. Beneficiaries will get a 3.6 percent cost-of-living adjustment for Social Security, which translates into about $43 a month for the average senior.

Patients who are sick enough to get inpatient hospital treatment will have to pay $24 more—or $1,156 in 2012, compared to this year's $1,132—for a deductible that covers the first 60 days of their care. The costs for patients will rise in 2012 by $6 for the next period of hospital treatment through 90 days, and by $12 for hospital care beyond 90 days. Medicare officials said those hikes were far below typical increases.

Advocates for seniors were happy with the news.

"Most beneficiaries will see a modest increase in monthly premium costs, far lower than what was initially projected, and some will see a significant decrease," said Medicare Rights Center President Joe Baker, who attributed some of the change the 2010 health care law (PL 111-148, PL 111-152).

AARP Legislative Policy Director David Certner said that the group was happy that most Medicare beneficiaries will have a lower increase than they originally thought.

"Millions of America's seniors are struggling with higher expenses—particularly higher health care costs, lower incomes, depleted savings and reduced home equity or homes lost to foreclosure, and this small increase is welcome news," said Certner.

Earlier this year, HHS officials said that average Medicare Advantage premiums for seniors in managed care plans would fall by four percent and premiums paid for Medicare's prescription drug plans would remain flat.

The estimates assume that Congress will prevent a nearly 30 percent cut in physician payments from occurring in January. From 2003 to 2011, Congress has voted to override reductions in doctors' Medicare rates.

• Medicare information

By Rebecca Adams, CQ HealthBeat Associate Editor

October 27, 2011 -- Medicaid officials in states throughout the nation are cutting medical providers' payments, turning more to managed care strategies and pushing some costs on to patients in order to compensate for the biggest one-year increase in spending in the program's history, according to a new report released Thursday by the Kaiser Commission on Medicaid and the Uninsured.

The dramatic spike in Medicaid costs to states is due in part to the loss of extra federal funding that had postponed the pain for a few years. The 2009 stimulus law (PL 111-5) contained nearly $90 billion in additional Medicaid money but those funds expired at the end of June, when the fiscal 2012 year was starting in most states. As a result, state spending is jumping 28.7 percent in fiscal 2012, after rising 10.8 percent last year. When the bonus federal funds were first available, the state share of spending had fallen for two consecutive years, which had never happened before.

As the federal funds evaporated, state revenues were still below the levels that they had been before the recession. States faced budget shortfalls totaling at least $149 billion for fiscal 2012 through fiscal 2013, according to the report. Already, states had filled budget gaps of $430 billion in fiscal years 2009-2011.

Medicaid enrollment, which surges when people lose their jobs and health coverage, is higher than it had been before the recession although some Medicaid directors reported that the growth was beginning to wane. Enrollment is expected to rise about 4.1 percent in fiscal 2012, compared to 5.5 percent in 2011 and 7.2 percent the year before.

To cope with the difficult fiscal climate, state officials are cutting spending as much as possible. The report found that in fiscal 2012:

• Forty-six states have cut rates for some providers in fiscal 2012, after 39 states took similar action in fiscal 2011. About 28 states have raised payments to specific providers. But study author Vern Smith that the payment cuts tend to be broad while the increases typically are narrow boosts to a small range of providers. Hospitals were particularly hard hit, with 40 states lowering inpatient rates in fiscal 2012.
• Twenty-four states expanded the use of managed care plans or techniques used by health plans, after 17 took similar steps in fiscal 2011.
• Fourteen states shifted their costs to patients by raising or adding co-payments, after five states did so in fiscal 2011.

The study, the 11th annual report produced by the commission, is based on survey results from Medicaid directors throughout the country. Surveys were conducted in July and August. Valerie J. Harr, director of the Division of Medical Assistance and Health Services in the New Jersey Department of Human Services, praised the report as the most thorough one she had seen.

• Kaiser Commission on Medicaid and the Uninsured

By John Reichard, CQ HealthBeat Editor

October 26, 2011 -- Lobbyists were scrambling to pry loose details about how a surprisingly big package of Medicare and Medicaid cuts proposed by Senate Finance Committee Chairman Max Baucus would hit the health industry—including to what extent, if any, the cuts might be used to fix Medicare's doctor payment formula.

The size of the cuts proposed by Baucus, D-Mont., in deficit negotiations—$500 billion in Medicare and Medicaid over 10 years, according to congressional aides—stirred speculation about whether a "doc fix" might be included. According to one participant at the negotiating session, the $500 billion did not include funding for a solution to the Medicare physician payment problem. But Baucus did mention that it could be included later.

The cuts proposed by Baucus appear to be part of a share-the-pain approach in which Democrats offer big entitlement cuts to get Republicans to agree to tax increases.

Other details about where the $500 billion would come from were sketchy. But congressional sources said $400 billion would come from Medicare and $100 billion from Medicaid. Of the $400 billion in Medicare cuts, providers and beneficiaries would each see $200 billion in reductions.

Proposals on the table when White House and GOP negotiators were discussing a "grand bargain" earlier this year may offer some clues as to the specific cuts Baucus has in mind. Big-ticket items mentioned by participants that would affect Medicare beneficiaries included limits on Medigap coverage, increases in Medicare Part B and Part D premiums, higher co-payments for home health care, and increases in the Medicare eligibility age.

Changes mentioned that would affect providers and suppliers include cuts to home health agencies, skilled nursing facilities and rural hospitals; lower payments to compensate hospitals and nursing facilities for beneficiaries who don't pay their out-of-pocket charges; and requiring drugmakers serving the Medicare population to give the same discounts they now give Medicaid beneficiaries to low-income Medicare enrollees.

Regarding Medicaid, negotiators have discussed limiting the use by states of taxes on providers as a way to increase federal matching payments, as well as a "blended FMAP" approach that could be used to trim the federal government's overall share of Medicaid costs.

In addition to reducing deficit spending, lawmakers also have to find a way by the end of the year to fund the doc fix. Baucus appears to have a small physician payment patch in mind. That's because replacing the payment formula entirely to prevent continuing yearly cuts would cost at least $300 billion over ten years. A more modest fix—for example, delaying by one year the 30 percent payment cut scheduled for Jan. 1—would require offsets totaling some $25 billion over 10 years, according to the Congressional Budget Office.

Julius W. Hobson, a senior policy adviser with the law firm Polsinelli Shugart, said that "in meetings last week with staff from authorizing committees, the Joint Committee and leadership, no one was really positive on inclusion of [a doc] fix in the deficit reduction package, if there is one."

That means the Senate Finance and House Ways and Means and Energy and Commerce committees would have to come up with a physician payment patch after the Joint Committee on Deficit Reduction wraps up its work at the end of November.

Hobson said it seems that nothing will happen on physician payment until the Joint Committee is done with its work. "No one will predict the length of a fix," he said. I have been told one, two, and three to five years." Hobson said it all depends on what offsets are available after the Joint Committee is done.

By John Reichard, CQ HealthBeat Editor

October 28, 2011 -- The California Medical Association blasted a decision by federal officials this week to approve $623 million in Medicaid cuts that state officials asked for. The group says the cuts will deny poor people access to doctors, drive many sick Californians into costly emergency room care and badly weaken the state's Medicaid system just as millions of uninsured residents get access to coverage under the federal health care overhaul law.

"CMA is extremely angry with CMS for approving these cuts in light of the overwhelming access to care problems in the state's Medi-Cal program," the medical group said in a statement Oct. 27. "The cuts will unquestionably cause irreparable harm to patients by forcing physicians out of the Medi-Cal program."

Cindy Mann, head of the federal part of the Medicaid program, said that the cuts would be monitored to ensure that patients have access to care.

California officials said that they received federal approval for a 10 percent cut in payments to doctors, clinics, optometrists, therapists, labs, dental services durable medical equipment, and pharmacy. They also got the nod for a 10 percent payment reduction to free-standing nursing facilities and adult subacute care facilities.

State officials said they would no longer ask for to 10 percent payment cuts to doctors and clinics for treating children. The California Department of Health Care Services said it is "still reviewing some long-term care services to determine if additional proposed reductions should be reduced or in any additional reduction would be appropriate."

Department of Health Care Services Director Toby Douglas said "we value our provider partners and look forward to continuing our service to our most vulnerable populations. We will conduct ongoing monitoring and assessment of beneficiary access, thus ensuring they continue to receive essential health care services."

CMA said that "California's Medi-Cal rates are already almost the lowest in the nation. Currently, half the doctors in the state cannot afford to participate in the program. The gaping hole in the safety net will be further exacerbated as there will be three million uninsured newly eligible for Medi-Cal in 2014 under the federal health reform legislation."

CMA's CEO, Dustin Corcoran, said that "the President built his expansion of access to care on the Medi-Cal system and with this decision his administration has effectively destroyed it. Adding three million patients to Medi-Cal while reducing physician resources is nothing but a recipe for disaster."

CMA said that it commissioned an independent study that found 49 percent of Medi-Cal patients are unable to get health care when they need it, compared to just 26 percent of privately insured patients.

James T. Hay, CMS's president, said that "with these cuts, physicians will only be reimbursed $11 per Medi-Cal patient visit, when it costs the physician several times that to provide" care. The CMA statement also said that recent data show emergency room use by Medi-Cal patients increased 30 percent between 2007 and 2009.

Cindy Mann, director of the CMS Center for Medicaid and CHIP Services said, "We are providing California with flexibility to address their difficult budget circumstances while protecting the health care needs of Californians served by the Medicaid program. Many of the state's rate cut proposals are now off the table, and we and the state will monitor implementation of the remaining reductions on an ongoing basis to ensure that they do not jeopardize Californians' access to care."

According to the CMA, CMS has yet to rule on other cuts requested by California, including $5 co-payments for physician visits, $50 co-payments for ER visits, and a cap of seven office visits per year.

By CQ Staff

October 24, 2011 -- Medicare recipients could turn to community health centers as the primary place for their medical care under a demonstration project federal officials recently announced, a program that will provide $42 million in grants over three years to 500 clinics in 42 states.

The Advanced Primary Care Practice demonstration, created by the health overhaul law (PL 111-148, PL 111-152), is designed to reward clinics for giving day-to-day primary health care to patients in an effort to keep them from getting much more expensive care in emergency rooms.

Clinics will get bonus payments for delivering quality care and for such services as helping patients manage chronic conditions such as diabetes or high blood pressure.

The money from the grants can also help health centers expand their hours, make same-day appointments and accommodate patients with urgent-care needs.

"The goal of this demonstration is to help patients get the care they need in a primary care setting rather than in an emergency department," said Donald M. Berwick, administrator of the Centers for Medicare and Medicaid Services. "When patients are able to use a health center as their primary source of care, it helps primary care doctors, nurses and specialists coordinate their care. Health centers will also use health care dollars more wisely as patients receive the right tests, right medications and right treatments in the right setting."

The demonstration will begin Nov. 1 and continue through Oct. 31, 2014. Participating health centers will be paid a monthly fee for each eligible person with Medicare that receives primary care services. CMS's Center for Medicare and Medicaid Innovation, known as the Innovation Center, and the Health Resources and Services Administration will provide technical assistance to help participating community health centers throughout the demonstration.

By Charlene Carter, CQ Staff

October 27, 2011 -- The House passed a bill that would repeal a requirement that government agencies withhold federal taxes from payments to contractors, and endorsed a second bill to offset the first measure's lost revenue.

The second measure (HR 2576), passed 262-157, would rewrite an income formula used to calculate subsidies for the purchase of health insurance on state-run exchanges and to determine eligibility for Medicaid.

The House passed 405-16 the measure (HR 674), offered by Wally Herger, R-Calif., a member of the Ways and Means Committee, that would repeal the law (PL 109-222) that requires the federal government, as well as state and local governments, to withhold 3 percent of most payments made to government contractors. That rule is scheduled to take effect Jan. 1, 2013. All 16 votes against the measure came from Democrats.

The repeal has gained bipartisan support in Congress, and the Obama administration endorsed it.

"The effect of the repeal of the withholding requirement would be to avoid a decrease in cash flow to these contractors, which would allow them to retain these funds and use them to create jobs and pay suppliers," according to a statement of administration policy issued last week.

Majority Leader Eric Cantor, R-Va., said, "This is another bipartisan and commonsense solution to support the small business men and women of our economy so that they can support and begin to regenerate our ailing economy."

Sander M. Levin of Michigan, the ranking Democrat on the Ways and Means Committee, said the bill is not going to address the need for creation of jobs.

"Let's not pretend it's a job creation bill," Levin said. "To call it that is a pure smokescreen."

New Jersey Democrat Bill Pascrell Jr. agreed, calling the measure a "very small part of a jobs plan."

The Congressional Budget Office estimated the cost of the repeal at $11.2 billion through fiscal 2021.

The health measure (HR 2576), sponsored by Republican Diane Black of Tennessee, would take into account an individual's Social Security benefits when determining eligibility for certain health care programs, such as Medicaid.

Under a provision in the 2010 health care law (PL 111-148, PL 111-152), individuals would be allowed to exclude Social Security benefits from their income when calculating such eligibility. The bill would rescind that, and it could reduce deficits by $13 billion through fiscal 2021, according to estimates by the CBO and the Joint Committee on Taxation.

"By aligning this definition with other federal subsidy programs, the legislation ensures that taxpayer funds will not be used to enroll middle class individuals into Medicaid," Ways and Means Chairman Dave Camp, R-Mich., said.

New York Democrat Joseph Crowley refuted Republicans' arguments that the provision was a glitch in the law, but that it was written into the law deliberately.

"Benefits are generally not added back in determining one's modified adjusted gross income for other benefits that they receive such as IRA contributions, student loan interests, and adoption tax benefits, but we are changing that definition today for consideration of who can obtain tax credits to purchase private health insurance." Crowley said. "There is nothing about this bill that is well intentioned."

Under the rule governing consideration of the two measures, the health bill will be incorporated into the withholding measure, and the combined measure (HR 674) will be sent to the Senate.