By Jane Norman, CQ HealthBeat Associate Editor

January 13, 2012 -- Democratic attorneys general recently filed an initial brief with the Supreme Court supporting the constitutionality of the health care overhaul and likely will file at least two more on separate issues, including the overhaul's Medicaid expansion.

The move comes the day after nearly 500 state legislators also filed a brief supporting its constitutionality, indicating that the overhaul's supporters are marshaling forces to counter the attention focused on the 26 states that are challenging the law (PL 111-148, PL 111-152).

Those states, with Florida in the lead, will argue before the court in March along with the National Federation of Independent Business and two individuals.

In their brief, the Democratic officials took a shot at the Republican governors and attorneys general who have pushed the battle all the way to a historic session at the high court.

"Rather than embrace the essential genius of the constitutional design and its allocation of regulatory authority between the states and the national government, the respondents seek to justify their attack on the minimum-coverage provision with a novel misconception of the commerce power, one that does not derive from any principled understanding of federalism," the Democrats wrote.

Friday was the deadline for groups that back the law to file briefs in connection with its requirement that all Americans have health insurance. The result was a flurry of documents from interested groups.

Many more briefs from both outside groups and the parties involved are still to come in advance of the three days of arguments, under a schedule for briefs the court has laid out.

Arguments are separated into the four issues the court will tackle: the individual mandate, the Anti Injunction Act of 1867, the Medicaid expansion and the potential separation of the mandate from the rest of the law.

In a conference call with reporters, Maryland Attorney General Douglas Gansler said attorneys general from four states including Maryland took the lead in drafting their brief. When it was filed on Friday afternoon, 11 had signed on.

Gansler said the states backing the brief would normally strongly resist federal encroachment on their rights. "But the health care problems that the act attempts to address have been an albatross on our citizens for decades and require a federal solution. But a federal solution whereby each state maintains the right to implement its unique health care system is consistent with the federal legislation," he said.

He said that "of course" Congress has the authority to make Americans buy health insurance, just like it drafts soldiers at a time of war or compels citizens to pay taxes. "The idea that this is somehow different because here we have to purchase something is a distinction without difference," Gansler said.

Other states expected to sign the brief are California, Connecticut, Delaware, Hawaii, Illinois, Iowa, New Mexico, New York, Oregon, and Vermont. The District of Columbia and the Virgin Islands also are taking part.

California Attorney General Kamala Harris said the historical understanding of the Commerce Clause is that it allows Congress to act when states can't act alone. The individual mandate is justified because it's essential to the proper functioning of the law, she said. And the law embodies "cooperative federalism," in which states carry out the federal law according to their preferences, she said.

Iowa Attorney General Tom Miller said that "if anything is interstate commerce, it's health care," and limits on the Commerce Clause should be explored in cases that don't affect so much of the economy.

The 26 states battling the law have strongly objected to its expansion of Medicaid, a provision that will be argued separately. Aides to Gansler said their brief touches on Medicaid but will explore that issue at length in a separate brief to be filed later.

In other briefs:

• Patient advocacy groups including the American Cancer Society and Cancer Action Network, the American Diabetes Association and American Heart Association argued that the provision requiring all Americans to have health insurance is necessary to implement the entire law. Congress saw it was needed to accompany patient protections or people would wait until they were sick to buy insurance, they said.

"Congress recognized that the ban on pre-existing condition exclusions and the prohibition of discrimination based on health status must be coupled with the minimum-coverage provision to be effective in achieving the patient protections, cost reductions, elimination of inequitable cost-shifting, and improvements to health insurance Congress intended," they said.

• Groups including the National Women's Law Center, NARAL Pro-Choice America, the National Council of Jewish Women, American Association of University Women, Planned Parenthood Federation, and more said in their brief that a major purpose of the law is to improve women's access to health care and health insurance, and end practices that discriminate against women.

"The nationwide consequences of the insurance market's failure to meet women's needs are significant," the brief notes in its summary of what is often called the Affordable Care Act (ACA). "In 2009, immediately prior to the ACA's passage, nearly one in five women ages 18 to 64 was uninsured."

• Scholars who study the history of U.S. health policy, including Judy Feder of the Georgetown University Public Policy Institute, Jacob Hacker of Yale University, and Tim Jost of Washington and Lee University, filed their own brief.

"The ACA does not create a new health care system, and it clearly does not constitute a federal government "takeover" of American health care," they said. "Rather, it continues a policy toward health care that began in the middle of the last century through which Congress has continuously fostered the development of the nation's private health care delivery and financing system, filling gaps with public programs only as necessary."

• The American Nurses Association, American Academy of Pediatrics, Doctors for America, and others said in a brief written by Ian Millhiser of the Center for American Progress that the health insurance market does not function like any other market. "The national market for vegetables is not in danger of collapsing if Congress does not require people to buy broccoli," they said. "Nor is there a risk that Americans will cease to be able to obtain automobiles absent a law requiring the purchase of GM cars. The nation's individual health insurance market, by contrast, is susceptible to complete collapse if people can wait until they are ill or injured to buy insurance."
• The Small Business Majority and Main Street Alliance, groups that often ally with Democrats, said in a brief that the health care law addresses financial burdens associated with health insurance that affect many small businesses.

"Small businesses pay on average 10 to 18 percent more than large employers to provide the same level of health benefits," they said. "These higher health care costs translate into substantial competitive disadvantages for small businesses. [The Patient Protection and Affordable Care Act] pursues broad-based reform, but the law's end result will help remedy those additional problems specifically hurting small business."

• The California Endowment, a private foundation that advocates for the expansion of health care to the uninsured, said in its brief that care for the uninsured totaled $43 billion in 2008. "The costs of such care are transferred throughout the interstate economy through private insurers, who raise insured individuals' premiums, creating an ongoing 'free-rider' problem," the brief said.

By Nellie Bristol, CQ HealthBeat Associate Editor

January 10, 2012 -- The lingering effects of the recession kept people from using medical services, leading to the second year of historically slow growth and a stabilization of health spending as a share of gross domestic product, the Centers for Medicare and Medicaid Services (CMS) actuaries recently reported.

Health spending increased 3.9 percent in 2010, up slightly from 3.8 percent in 2009. Rates over the previous several decades ranged from a high of 13.1 percent in 1980 to 4.7 percent in 2008, according to the actuaries' yearly report, published in the January issue of Health Affairs. As a result of the slowing, health spending as a share of the gross domestic product stayed at 17.9 percent for the second consecutive year.

Overall, health spending totaled $2.6 trillion in 2010, or $8,404 per person, compared with 2009 when spending was $2.5 trillion, or $8,149 per capita.

The study says the health care overhaul (PL 111-148, PL 111-152) had little effect on growth figures. While some provisions of the law are in effect, including some drug-related benefits and a high-risk pool to cover those with pre-existing conditions, the act added only 0.1 percentage point to the total. The act "had a negligible impact on total spending or shifted the distribution of spending without affecting the overall rate of growth," the analysis says.

"The slow growth in health spending in 2009 and 2010 was influenced by slower growth in the use of health care goods and services as consumers remained cautious about their spending—in part because of losses of private health insurance coverage, lower median household income and future financial uncertainty," the report says.

Driving the trend was lower spending for hospital care and physician and clinical services, as well as "record low growth" in prescription drug costs, the researchers say. Hospital care spending grew 4.9 percent, compared to 6.4 percent in 2009.

"In 2010, consumers continued to postpone medical care, as demonstrated by a decline in median inpatient admissions and slowing growth in emergency department visits, outpatient visits and outpatient surgeries," the analysis says. Physician and clinical services spending grew 2.5 percent in 2010 compared to 3.3 percent in 2009.

Prescription drug spending grew 1.2 percent, compared to 5.1 percent in 2009. Researchers attributed the decrease to slower growth in the number of drugs used, increased use of generic medications, patent expirations of some brand-name drugs and introduction of fewer new drugs than in previous years.

More than a statement on future trends in health spending, the analysis "shows the health care industry and people's use of health care really is affected by recession," said Paul Ginsburg, president of the Center for Studying Health System Change.

A question raised by the study is whether people are foregoing needed care that will then require larger health expenditures in the future, or if it heralds a longer-term trend of less use of nonessential care, he added.

"We know that when people economize on care that some of the things they economize on are just fine —self-limiting problems—and some of them will result in the condition becoming more serious and perhaps more difficult to treat later on," Ginsburg said.

Another question is whether, as in other economic downturns, health spending will resume its climb after the recession ends. "Will things rebound? They have in the past, but that doesn't mean that this cycle and the future will be like it has been in the past," said Stephen Heffler, director of the CMS National Health Statistics Group.

In other findings, the federal government took on a larger percentage of health care spending in 2010, contributing 29 percent of all spending, compared to 23 percent in 2007. The percentage for other sponsors fell accordingly, with the state and local percentage going from 18 percent in 2007 to 16 percent in 2010, the business percentage declining from 23 percent to 21 percent and the household percentage decreasing from 29 percent to 28 percent.

The analysis also showed a significant decline in Medicare Advantage enrollment growth. Since 2005, enrollment growth was in the double digits, but it fell to 5.6 percent in 2010. Fee-for-service Medicare enrollment showed an increase of 1.5 percent after several years of decreases and growth of only 0.2 percent in 2009.

The White House said the analysis was good news because it showed "no spike in health care costs due to health reform." But the report notes that major provisions of the act, including health insurance exchanges and Medicaid expansion, won't occur until 2014.

• CMS News Release
• White House Blog

By Jane Norman, CQ HealthBeat Associate Editor

January 12, 2012 -- The Department of Health and Human Services (HHS) on recently said that Trustmark Life Insurance Company has proposed "unreasonable" health insurance premium increases for small businesses in Arizona, Alabama, Pennsylvania, Virginia, and Wyoming.

Company officials, however, protested that the agency was acting under "assumptions and premises" that did not take into account Trustmark's costs and the up-and-down nature of the small business insurance market.

The announcement came as part of the rate review process included in the health care law (PL 111-148, PL 111-152). Under the law, HHS is authorized to decide whether increases of more than 10 percent are unreasonable in the individual and small group markets and then publicize them to consumers. HHS, however, can't stop the increases from taking effect.

Insurance is generally regulated by the states and the power to stop a rate increase varies by jurisdiction.

The federal government only conducts rate reviews in states that are deemed to have ineffective review processes of their own. HHS started doing these reviews in the past few months and last week's announcement of an unreasonable increase was the second to be unveiled.

Gary Cohen, acting director of oversight at the Center for Consumer Information and Insurance Oversight in HHS, said in a conference call with reporters that Trustmark proposed increases of 13 percent or more over the past year that would affect 10,000 people. Those increases should be rescinded or explanations made by Trustmark, he said.

HHS officials said in a statement that when combined with other increases over the past year, Trustmark rates increased by 27.2 percent in Alabama and 18.1 percent in Arizona. Outside actuaries were hired by HHS to examine the proposals and the agency then made a final determination of whether the increases are unreasonable, said Cohen.

He also said three other proposed increases above 10 percent have been determined reasonable, in Louisiana, Montana and Missouri. Other reviews are pending.

HHS Secretary Kathleen Sebelius said in a blog post on the White House website that the action against Trustmark shows how the health care law is working. "Thanks to health reform, if your insurance company wants to hit your wallet with a major increase, they have to tell you why," she wrote. "And if you don't like what they have to say, you can take your business elsewhere."

In a statement, Trustmark officials said they have decades of experience providing health insurance to small businesses and their rate increases reflect rising costs.

"We respectfully disagree with the assumptions and conclusions drawn today by the U.S. Department of Health and Human Services," said the statement. "Our premiums are driven by the rising cost and increased utilization of medical services. As a smaller carrier, our loss ratios can vary significantly from year to year, and we take that volatility into consideration."

Cohen said Trustmark's proposal would not meet medical loss ratio rules also included in the health care law. That rule requires companies to spend 80 percent of premiums on medical services and improvement of quality of care in the individual and small group markets. Under its premium increase proposal the company would have spent from 56 percent to 74 percent, depending on the state, he said.

Trustmark said it will be in compliance with the medical payout rules. "If there are instances where we do not reach the required loss ratio as calculated under the federal regulations, we will, promptly and in accordance with the Affordable Care Act, rebate the difference to those customers," said its statement.

By CQ Staff

January 12, 2012 -- A new statistical brief by the Agency for Healthcare Research and Quality (AHRQ) confirms previous studies that a small segment of the population drives health care expenses. The data shows that 1 percent of the population accounted for 21.8 percent of health spending.

According to the study, health care expenses totaled $1.26 trillion in 2009. And among the 1 percent of the top spenders, the average cost was $90,061 per person.

"Studies that examine the persistence of high levels of expenditures over time are essential to help discern the factors most likely to drive health care spending and the characteristics of the individuals who incur them,'' the brief says.

While the change in the percent of spending that the 1 percent accounts for changed only slightly from 2008, when it was 20.2 percent, to the 21.8 percent figure in 2009, the data over the long term do show a downward trend. In 1996, the top 1 percent accounted for 28 percent of medical spending. The report also said that the top 5 percent of the population continued to account for about half of all health spending and the top 30 percent accounted for nearly 89 percent of all expenditures.

The brief also cited some demographic statistics about health spending but did not offer any analysis of the reasons for the disparity. For example, of those in the top 10 percent of spending in 2009, 80 percent were white, 60 percent were women, 3 percent were between ages 18 and 29, 9.5 percent were African American, 10.7 percent were Hispanic and 2 percent were Asian.

By Jane Norman, CQ HealthBeat Associate Editor

January 12, 2012 -- Uncertainty, apprehension, and questions continue to swirl around a surprising Health and Human Services (HHS) proposal to allow state officials to choose an essential health benefit template for their exchanges from among certain existing insurance plans in their states.

While the bulletin on the approach HHS intends to follow was billed as advantageous for states because it offers them "flexibility and freedom," patient advocates who expected a clearer national standard for benefit design were taken aback by the Dec. 16 announcement. And they remain wary.

Some are even raising questions about whether the agency is following the intent of the health care law (PL 111-148, PL 111-152). Many of their concerns center on whether, because the benchmark plans could be different in every state, benefits will vary widely across the country for people in the individual and small-group markets who, under the law, will be required to have insurance.

Meanwhile, in the states that are working on proposed exchanges, officials are scrambling to get the enrollment data on health insurance plans that will figure into decisions on which plans will serve as benchmarks. In some cases, such information is not immediately available or accessible. Many state legislators are already in session and are expected to continue working on the framework for their exchanges, which must be up and running by 2014. Getting enrollment data is key to the process.

It remains unclear when the HHS-issued guidance will be followed by rulemaking and whether the public comments will be made public. Rather than posting comments on a website, as is the case under traditional rulemaking, they are to be sent to an email address at HHS.

Department spokesmen did not respond to repeated questions about whether the public comments due by Jan. 31 on the essential health benefits bulletin will be made available.

In taking this approach to the essential benefit package, HHS was trying to avert a fight with states. So it proposed to let officials choose from among four different benchmark plans already offered in their states' commercial markets. States could pick one of the three largest small-group plans by enrollment; one of the three largest state employee health plans by enrollment; one of the three largest federal employee health plan options by enrollment; and the largest HMO plan by enrollment.

If states do not choose a benchmark, the default would be the small-group plan with the largest enrollment in the state. This approach will be used in the early years of implementation, 2014 and 2015, and then HHS will evaluate the method.

HHS Secretary Kathleen Sebelius wrote in a Jan. 4 column published in USA Today that "the coverage that works in Florida might not work in Nebraska," and under the HHS approach "states will have the option to pick their own standard from among the most typical, popular and proven employer plans in each state."

Pediatricians Question Plan

But that approach is coming in for criticism from medical groups such as the American Academy of Pediatrics, whose president said in an interview that pediatricians are worried that children will lose out on services they need if plans vary from state to state.

"I think it's another example of our willingness to settle, for other reasons, for less-than-optimal care of children," said Robert W. Block, president of the influential, 60,000-member group, which submitted detailed comments to HHS prior to its guidance announcement. The HHS bulletin "may be suggesting things that are not comporting with the statute," he said.

The overhaul requires coverage of services and items in 10 categories. HHS officials said that based on their research, the benchmarks will cover most of the essential health benefits. If a state selects a plan that doesn't hit all 10 marks, then it has to look at other plans to fill the gaps.

But Block said pediatricians are concerned that issues particular to children won't be addressed in those plans. Care for children is different from that of adults and should be modeled on the set of services provided by the Early and Periodic Screening Diagnosis and Treatment regimen that is in Medicaid plans, pediatricians say.

It is also going to be difficult administratively, Block said, wasting time that doctors could spend on medical services. "We as pediatricians would have to learn how to deal with 50 different plans," he said, adding that it would be particularly problematic in regions bordering two or more states.

The sheer number of possible choices for benchmark plans in the states—as many as 500—and what they may or may not cover has overwhelmed some advocates, said Marc Boutin, executive vice president and chief operating officer of the National Health Council, which acts as a voice for people with chronic diseases and disabilities. The HHS bulletin did not address how oversight would be conducted.

"I think it's sort of created a lot of anxiety," said Boutin, whose group would like to see HHS set a national definition for "medical necessity" applicable to the benefits plans.

But he expressed cautious optimism, saying that at their core, each of the benchmarks is consistent with a framework proposed earlier by the council and predicated on a broad set of services with exclusions.

"It's also clear from what HHS has said and done that there's a number of next steps to come," Boutin said.

Advocates Want More Time

Reflecting the current atmosphere of uncertainty, dozens of patient advocacy groups recently said they want the Jan. 31 deadline for public comments on the proposal delayed while they figure out what it means. The proposal was announced Dec. 16, just before a long holiday break.

Among the groups was the AIDS Institute, which has concerns about language dealing with prescription drug benefits and with preventive services. "I feel that HHS is not following the law, and they did not define the essential benefits," said Carl Schmid of the AIDS Institute. "We were anticipating the 10 services, the broad categories, with some descriptions in it. We didn't get that." Nonetheless, said Schmid, he also has been told that more information is coming soon and AIDS advocates are meeting next week with HHS officials.

"I think we can work within the apparatus," Schmid said. Patient protections at the national level also were anticipated but are absent, he noted.

In the states, the work now on essential health benefits is at the staff level, said Joy Johnson Wilson, health policy director at the National Conference of State Legislatures.

The HHS bulletin was important because it gave states the first clue as to how the federal government might proceed on the package, she said. "Now it's stage two. What does that really mean? We don't know the answer to that yet," she said. The states and the federal government also have to agree on definitions of what was said in the bulletin, she said.

Information has to be gathered on enrollment in the benchmark plans, and state officials are trying to pull that together to present to legislative committees so that it is available for hearings, she said. The challenge is that this is a short year for legislative action because it's an election year, and some sessions will end as early as March.

Wilson said "it would not be a good thing" for HHS to agree to the request for an extension of the deadline for public comment. "We are trying to make this as fast-track as possible so it allows legislatures time to do what they need to do to get these exchanges pulled together," she said.

By John Reichard, CQ HealthBeat Editor

January 12, 2012 -- The Medicare Payment Advisory Commission (MedPAC) voted last week to recommend that Medicare payments for hospital inpatient and outpatient care in fiscal 2013 be increased by 1 percent.

The recommendation was one of a series approved at the panel's meeting affecting other types of providers as well.

The commission also voted to recommend that Medicare lower payments to hospital outpatient departments for evaluation and management services so that they are equal to the reimbursements for those services when they are provided in a doctor's office. These rates should be equalized over a three-year period, it added. Examples of an evaluation and management service include when a doctor takes a patient history, makes a referral or orders a test.

The panel said that under the phase-in, hospitals with above average numbers of poor patients should lose no more than 2 percent of their Medicare revenues under the policy—what commissioners called a "stop-loss" provision. The commission also called on the Department of Health and Human Services (HHS) to monitor the impact on low-income patients of the policy.

"The Secretary of HHS should conduct a study by January 2015 to examine whether access to ambulatory physician services for low-income patients would be impaired," says the recommendation agreed to by the commission. "If access will be impaired, the Secretary should recommend actions to protect access," it added.

Commission staff estimated that the stop loss provision would protect a total of 120 hospitals over the three year period. Making evaluation and management rates equal would cut Medicare spending more than $10 billion over five years, staff estimated.

The recommendations on evaluation and management visits have sparked controversy.

The phase-in period and the study proposal represented additions to a draft recommendation on the issue unveiled at the commission's December meeting.

Hospitals Object

Although the changes aimed to address concerns over how the reductions would affect outpatient services at teaching and other facilities treating large populations of the poor, hospital representatives lined up at the microphone during the public comment phase of the commission's meeting to protest the recommendation.

"We are very disappointed," said Ivy Baer of the Association of American Medical Colleges. "We feel by 2015 that it may be too late—that a lot of these clinics may have either closed or already reduced the services that they are providing."

A representative of the National Association of Public Hospitals and Health Systems said the policy would cut $1 billion a year from payments to public facilities.

"These safety-net hospitals serve critical roles for vulnerable populations," the representative said. "They provide primary care and serve as medical homes for the patients. And these patients also have multiple chronic illnesses and mental and behavioral health issues and require more comprehensive services in the outpatient setting that are not available in free standing physician offices."

According to MedPAC projections, the profit margins hospitals have on Medicare patients will drop from a negative 4.5 percent in 2010 to negative seven percent in 2012. The margin figures take both inpatient and outpatient services into account.

Don May, an official with the American Hospital Association, predicted that the cuts for evaluation and management would make it difficult to provide certain basic services. He asked how hospitals will have funding to keep emergency rooms open 24 hours a day, seven days a week.

Some commissioners expressed reservations about the "E & M" proposal. Herb Kuhn, president of the Missouri Hospital Association, voted against it, saying he thought services provided in doctor's offices and those in hospital outpatient departments were "apples and oranges" because of the different types of patients involved. He also voiced worry about the many added insured Americans who would be seeking services under the health law starting in 2014. Mitra Behroozi, a lawyer with the Service Employees International Union in New York City, said she feared clinics could close in that city. And George N. Miller, a health personnel specialist, said he thought protections in the proposal were too weak. But most commissioners went along, saying the panel needs to champion the principle that payment levels for the same service shouldn't vary across different types of treatment settings.

MedPAC recommendations that lead to spending reductions are being snapped up by lawmakers and the administration in the past couple of years. They have figured in Medicare cuts used to cover the uninsured in the health care overhaul law (PL 111-148, PL 111-152), in deficit reduction proposals, and in legislation to patch payment cuts triggered under Medicare's controversial physician payment formula.

The evaluation and management proposal was included in the measure passed by the House in December to block Medicare doctor payment cuts through 2013. The proposal seems likely to get strong consideration once again as a pay-for as lawmakers seek to extend the current two-month physician payment patch that expires at the end of February.

Other recommendations

The commission also agreed to payment recommendations for other sectors of health care at the morning portion of its meeting. It said Congress should update payment rates for ambulatory surgical centers by 0.5 percent in calendar year 2013. Doing so would generate modest savings, cut Medicare spending by less than $1 billion over five years, commission staff said. The commission also voted to recommend that Congress direct HHS to establish a "value-based purchasing" program for ambulatory surgical centers by 2016. Payments would vary according to the quality and efficiency of care.

Another recommendation approved by the commission would increase outpatient dialysis payment rates by one percent in calendar year 2013. And payment rates for hospice care should rise by .5 percent in fiscal 2013, commissioners agreed.

The various recommendations will be submitted to Congress in a report due March 1. Lawmakers often ignore MedPAC recommendations but when they agree with the policy change involved they are quick to cite the panel's backing.