By Jane Norman, CQ HealthBeat Associate Editor

April 26, 2012 -- An aggressive new government effort to improve the quality of care for chronically sick Americans is a chief recommendation of a blue-ribbon panel of health care experts brought together by The Commonwealth Fund.

In an article in the New England Journal of Medicine published last week, The Commonwealth Fund Commission on a High-Performance Health System said that the nation also should aim to save $184 billion in health care costs over the next decade by setting a defined target. Per-capita health care spending should be reduced to the annual projected growth of the gross domestic product, plus half of a percentage point, by 2016, the commission said.

One way to improve health and cut spending would be for the Department of Health and Human Services and the Centers for Medicare and Medicaid Services to team up and launch an effort in 50 to 100 communities aimed at improving the care for people with chronic conditions, said the 17-member commission. The towns, counties, states or regions would take part voluntarily. Chronic illnesses would include coronary artery disease, diabetes and asthma.

Government officials could promote better primary care to those patients, give payment incentives for providers and make better use of health information technology in the targeted communities, the commission said.

The report is called: "The Performance Improvement Imperative: Utilizing a Coordinated, Community-Based Approach to Lower Costs and Enhance Care for Chronically Ill Patients." The chairman of the commission, David Blumenthal, a Harvard medical professor, says in the article that "for decades the United States has seemed powerless to curb excessive health care spending and improve quality of care. It is powerless no longer."

However, the federal government needs a comprehensive and disciplined plan to move forward, he writes.

By Nellie Bristol, CQ HealthBeat Associate Editor

April 23, 2012 -- The health care overhaul will save Medicare more than $200 billion through 2016 largely through provider and Medicare Advantage payment reductions, the CMS Office of the Actuary says in a report released last week.

The law (PL 111-148, PL 111-152), would save $85 billion in "improved productivity" by tying provider payments to the growth of the economy at large, the report says. Affected providers include hospitals, home health providers, skilled nursing facilities and hospices, among others. An additional $68 billion in savings comes from reductions in payments to Medicare Advantage plans, which have been paid about 14 percent more per patient than under traditional Medicare. "The Affordable Care Act levels the playing field by gradually eliminating most of this excess in payments to Medicare Advantage plans compared to Medicare's costs for beneficiaries in the traditional program," the report said.

The estimates come as the Medicare Trustees set an insolvency date of 2024 for the Hospital Insurance Trust Fund, the same forecast as last year's. But, the trustees stress, despite some short-term stability in the program's finances, action is needed to strengthen them over the long term.

While CMS says the overhaul extends the life of the fund by an additional eight years, savings under the act were questioned in a report released last month by a Republican trustee. Charles Blahous of the George Mason University Mercatus Center said the overhaul would add more than $340 billion to the deficit. The claim was disputed by White House officials, who said Blahous used a different set of assumptions than those used by the Congressional Budget Office. CBO estimates the act will reduce the deficit.

The CMS report outlines $41 billion in savings through expanded benefits, lowered payments for hospital acquired conditions, readmission reductions and adjustments to premium subsidies under the overhaul. Efforts to improve patient safety would save an additional $10 billion through 2013. Fraud and abuse-reduction efforts and changes to durable medical equipment payments would net $7.8 billion in savings.

In addition to reducing program outlays, the law will decrease costs for beneficiaries in traditional Medicare by $60 billion through 2016 and $208 billion through 2021, according to the Health and Human Services assistant secretary for planning and evaluation.

CMS says the overhaul also lays the foundation for sustained changes to the health care delivery system that will continue to reduce costs. Many of the efforts are conducted through the CMS Innovation Center "which has already launched initiatives involving more than 50,000 health care providers that will touch the lives [of] Medicare and Medicaid beneficiaries throughout the nation."

Among demonstration programs cited by the report are those that provide higher payments to primary care providers and a variety of pilots to test different payment arrangements, encouraging home care and improving care coordination. It also cites pay for performance arrangements, chronic disease prevention programs and initiatives to reduce pre-term labor.

Among programs cited is the "five star" plan bonus system for Medicare Advantage Plans, an arrangement GAO recently blasted for costing $8.6 billion.

By Jane Norman, CQ HealthBeat Associate Editor

April 26, 2012 -- Some consumers will be getting a happy surprise when later this year health insurers ship out rebates mandated by new medical payout requirements in the health care law, according to a new study issued on last week by the Kaiser Family Foundation.

It's one way that the controversial health care overhaul (PL 111-148, PL 111-152) might rise in public opinion at a crucial time, when the U.S. Supreme Court is considering whether to strike it down entirely or in part and President Obama is in the thick of his re-election campaign.

The study estimates that $1.3 billion will be distributed to policy holders and employers this year, including $426 million in the individual market, $377 million in the small group market and $541 million in the large group market. Kaiser notes that the largest sum is in the large group market, but that's also an insurance segment that covers many more customers.

Rebates will vary among states and among insurers, and in some states none will be paid. But in other places, it will be a substantial chunk of change that can be paid out either in the form of checks or in discounts on future insurance coverage. Kaiser estimates that the largest rebates in the individual market will be paid out in Alaska, at an average $305 per person; Maryland, $294 per person; Pennsylvania, $243 per person; Idaho, $241 per person; and Mississippi, $236 per person.

Kaiser says that overall, a third of all Americans with policies in the individual market will get rebates, including 92 percent of Texans, 86 percent of Oklahomans and 84 percent of South Carolinians. In total, 215 individual insurance plans covering 3.4 million people will be sending out rebates, said Kaiser.

The rebates are being issued under medical loss ratio (MLR) standards that were included in the law and took effect at the beginning of 2011. It requires insurers to spend a certain minimal amount of premium dollars on medical care or improvements in quality—80 percent for individual policies and 85 percent for big groups. If the insurance companies do not do so, they must issue rebate checks to consumers the next year.

Seven states have received temporary reprieves from the requirements in the law that were granted by the Department of Health and Human Services.

Drew Altman, president of the foundation, said the study shows that the law may continue to divide Americans but there are "tangible changes" that benefit consumers. "Greater regulatory scrutiny of private insurance is improving value and helping to get excess costs out of the system," he said.

Some Republican members of Congress would disagree and have sponsored legislation (HR 2077) that would repeal the new standards. Another bill (HR 1206) would exclude broker fees from the MLR calculations.

The analysis was completed by Kaiser with the assistance of the company Mark Farrah Associates, and based on data reported to state insurance departments.

In the small group market, 146 plans will pay rebates to 4.9 million consumers, about 28 percent of everyone enrolled in such plans. Small businesses and employees in the District of Columbia, South Carolina, New Jersey and Florida are most likely to see rebates.

In the large group market, most employers are expected to be in compliance with the new standards. Insurance companies in 14 states say they don't expect to issue any rebates. Kaiser says that overall, 125 insurers say they will issue rebates to 7.5 million enrollees.

For group plans, individual employees may or may not actually see the rebates. Kaiser says that insurers will provide the rebates to the group policyholder, usually an employer or a plan established by the employer. What the employer or plan does with the rebates and how they are used for the benefit of enrollees depends on what kind of plan it is, under provisions in the law, says Kaiser.

By John Reichard, CQ HealthBeat Editor

April 27, 2012 -- A Health and Human Services (HHS) bulletin released this week lays out an interim strategy that health insurance exchanges would follow in determining employer-sponsored health coverage.

Knowing the details of someone's insurance status, including any employer coverage, is key in determining whether someone is eligible for federal subsidies to lower their premium costs.

The strategy outlined in the bulletin would be used starting in 2014 and 2015, the first two years the health care law (PL 111-148, PL 111-152) requires that the new exchanges start operating.

The proposed strategy would allow the process of documenting the type of employer coverage an exchange customer has to be carried out in two stages: one that starts before someone enrolls in a health plan, and the second afterward.

There are several ways people going to exchanges can qualify for federal subsidies that would lower their premium costs.

For example, they qualify if they are uninsured and fall within a certain income range. They also may qualify if they are working and their employer doesn't offer coverage, or if their employer offers coverage that costs too much, or the insurance doesn't meet the coverage standards the health care law sets out.

But if someone has employer-provided insurance even for a portion of a year, whether or not it meets the health law standards, no subsidy is available. (In other words, the federal government does not want to be on the hook for subsidies if people decide to take employer-sponsored coverage. But the government will provide subsidies if people decide they do not want employer coverage that doesn't meet health care law standards.)

Documenting a customer's status in relation to employer-sponsored coverage means gathering data from employees and employers. Federal officials know that if the process is too frustrating and time-consuming for the parties involved—the applicant, the employer or the exchanges—the health care law won't function smoothly and could lose political support once it's up and going.

The bulletin, issued by the Center for Consumer Information and Insurance Oversight at the Centers for Medicare and Medicaid Services, seeks to ease the paperwork burdens on these parties while dealing with the absence of authoritative data sources to document employee coverage status.

"Data sources that contain all the information exchanges will be seeking to verify do not currently exist," the bulletin says.

So, as an interim strategy, the bulletin says HHS is proposing to provide a standardized method for employers and employees to voluntarily collect the information an employee will need to complete an application in order to enroll in a health plan offered by an exchange. The bulletin doesn't detail what the "standardized method" is.

An example of that information an employee will need to give the exchange but may not know is "the employer identification number."

The second part of the interim strategy calls for allowing exchanges to rely on "limited pre-enrollment verification based on data sources available to an exchange and a post-enrollment verification screening process where data sources are not available during the eligibility determination process."

This interim strategy could be modified or dropped as "exchanges gain access to data sources that might allow more pre-enrollment verification."

The bulletin also, in effect, admits that HHS needs help. It asks for public comment on how exchanges "can best achieve real-time verification of access to employer-sponsored coverage information during the enrollment process without creating burdens on applicants or employers."

Neil Trautwein of the National Retail Federation said in an email message that he will be talking to his membership to get their views on the bulletin but noted that "complexity is not the ACA's [Affordable Care Act's] friend." Trautwein commended the apparent attempt of the bulletin to be flexible as "helpful, though I keep encouraging regulators to keep their eye not only on the regulation before them but the cumulative weight of the ACA regulations. If they are not careful, regulators may break the back of employer-based coverage."

By John Reichard, CQ HealthBeat Editor

April 26, 2012 -- The Centers for Medicare and Medicaid Services announced a final rule last week to allow frail and disabled Medicaid enrollees to more easily receive services outside of nursing homes.

The agency also announced participants in its "Independence at Home" demonstration program in which health care teams make regular visits to the homes of the chronically ill to monitor their conditions and give them preventive care that helps keep them out of nursing homes. Both programs are part of the health care law (PL 111-148, PL 111-152).

The final rule sets out in Medicaid a "Community First Choice Option." Participating states get a 6 percentage-point increase in federal Medicaid matching funds to provide community-based services to beneficiaries who otherwise would be confined to nursing homes.

In a White House blog post, Henry Claypool, a disability adviser to HHS Secretary Kathleen Sebelius, said that 16 organizations were picked to take part in the Independence at Home program. He also noted that the administration recently created the "Administration for Community Living" at HHS that brings together various offices in the department involved in providing community services to the disabled.

Blog

By Nellie Bristol, CQ HealthBeat Associate Editor

April 27, 2012 -- Democrats should consider some form of premium support, while Republicans should be more open-minded about fee-for-service payment changes enacted by the 2010 health law in order to forge a consensus on a Medicare overhaul, former Sen. John B. Breaux said recently.

Democrats, Breaux said, need to avoid extreme characterizations of Republican proposals including "the argument of ending Medicare as we know it," he said. "We're talking about keeping Medicare, but a different delivery system." Breaux testified at a House Ways and Means health subcommittee hearing on premium support and spoke with reporters afterward.

While in the Senate, the Louisiana Democrat developed a Medicare overhaul proposal with former Majority Leader Bill Frist, R-Tenn., then a senator, that included premium support.

New payment methods in the health care law (PL 111-148, PL 111-152), such as the move to valued based purchasing and bundling of payments, should be given time to work and could lower costs and improve care, Breaux added. "In the event that we move to a premium support model where there is more price competition between [fee-for-service] and private plans, the whole system would be better off if these promising ... Medicare reforms ... work." Breaux is now senior counsel at Patton Boggs LLP.

While there is broad consensus on the need to restructure Medicare to make it more efficient and financially sustainable, Breaux said there is no chance for widespread bipartisan agreement on the issue before the November election. Nonetheless, he said, conversations should continue between the parties to set the groundwork for later compromise. "I do sense that it's a better conversation now, and better feelings among both sides that a different delivery system needs to be accomplished," he said.

In perhaps an example of that softening, Alice M. Rivlin, of the Brookings Institution and Georgetown University and an appointee under several Democratic presidents, compared a plan she developed with former Republican Sen. Pete V. Domenici of New Mexico to a premium support proposed by House Budget Committee Chairman Paul D. Ryan and Oregon Democratic Sen. Ron Wyden. Under their model, the government would contribute a set amount to beneficiaries for them to purchase insurance in the private market. Ryan, R-Wis., originally wanted to eliminate all Medicare fee-for-service but when he teamed up with Wyden they maintained traditional Medicare as an option.

Like Breaux, Rivlin made an appeal for similar bipartisan approaches. "Health care policy is far too important be driven by a single party's ideology," she said. "No matter how the 2012 election turns out, the president and the congressional leadership should strive to find common ground both on how to cover the uninsured and how to reform Medicaid and Medicare while stabilizing the debt." Ryan agreed with the assessment and much of Rivlin's reform approach. "There is really room for the two parties to talk to each other about this issue," he added. "If we can just calm down a little bit we might even save the program."

In more specific policy discussions, Breaux said that under premium support, tying growth of the government's payments to Medicare beneficiaries to health care spending rather than general economic growth is crucial to ensuring that the government's payments keep pace with health costs. "The contribution amount by the federal government would be based on the national average, weighted by plan enrollment and adjusted for risk and geography, of the premiums for the standard benefit package," he said. "Updates would be based on actual health care costs at the time—not some arbitrary growth rate like GDP.

Joseph Antos of the American Enterprise Institute pointed out that both Ryan and President Obama have tied Medicare payment increases to the GDP.

Premium Support Pioneer Bolts

Such conflicting methods for determining payment updates is one of reasons Henry Aaron of the Brookings Institution gave for no longer supporting the concept of premium support. Although Aaron is credited with pioneering the term, he said differing policy elements of current proposals mean "none of the plans now under discussion qualifies as 'premium support.' In fact, Democratic lawmakers call Ryan's plan a voucher plan, not premium support.

In Aaron's 1990's proposal, developed with then Brookings colleague Bob Reischauer, a health insurance voucher was linked to general health costs. "If competition boosted efficiency, enrollees and the taxpayer would both gain," he testified. "But if competition didn't boost efficiency, the first and overriding goal should be to protect the very vulnerable people who are enrolled in Medicare from increased financial burdens they could ill afford."

Aaron said he does not advocate premium support for Medicare under current circumstances. "I believe there are overwhelming and persuasive reasons why it should not be enacted now," he said. "I also have become less confident that premium support, even it if works for the rest of the population, would be desirable for Medicare."

In explaining his change of opinion, Aaron cited an improved financial outlook for the Medicare Part A trust fund since enactment of the health overhaul and the development of health insurance exchanges under the law. The exchanges, he said, are a work in progress and would likely be improved over time. But given that, such a structure may not be suitable for Medicare enrollees who are sicker and more disabled than the population covered under the health law. "Only after the health insurance exchanges called for by the Affordable Care Act have been set up, only after the administrative problems they will doubtless confront have been solved, and only after we have some reason to believe that they will be able to handle the much more challenging Medicare population—only then would it make sense for Congress to consider shifting Medicare enrollees to vouchers."

Aaron also said hopes that premium support would lower costs through increased competition may not materialize, citing Medicare Advantage plans as an example. "The evidence to date is not encouraging," he said.

Antos said the evolution of Republican premium support proposals to include the continuation of traditional fee-for-service Medicare were a good move, noting the original program was likely to retain a strong hold in rural areas and other markets dominated by a few providers. "The objective of premium support should not be to drive out traditional Medicare," he said. "Instead, premium support should be designated to allow consumers to decide for themselves which plan provides the best value, and give them a clear financial stake in that direction."

With premium support, he added, financial incentives would develop that would "encourage better decision making on the part of both consumers and health care providers." With that, he added, spending targets would not be necessary "except as a budget mnemonic device that reminds us that resources are limited, even for the most urgent of programs."