By John Reichard, CQ HealthBeat Editor

February 27, 2012 -- Hospital and consumer groups for the most part reacted favorably last week to two Obama administration regulatory proposals to improve the quality and safety of medical treatment through more effective use of health information technology (IT).

Hospitals praised the long-awaited "stage two" proposed rules to spur "meaningful use" of IT for providing a flexible approach. Meanwhile, a consumer group said the stage two proposals will increase online patient access to their own medical data and ease e-mail communication with their doctors.

The so-called meaningful use regulatory program, established under the 2009 economic stimulus law (PL 111-5), requires providers to make increasingly sophisticated use of health IT over time in order to qualify for Medicare and Medicaid incentive payments. The program establishes three different stages of requirements in order to increase meaningful use of health IT. Eventually, providers will get lower reimbursements if they don't make such meaningful use.

Hospitals said that stage one initially demanded too much. The requirements were softened under the final rule.

In the new proposal, "there have been a lot of lessons learned" by the administration, said Samantha Burch, vice president of quality and health information technology at the Federation of American Hospitals. But hospitals also criticized proposed financial penalty provisions for those failing to use the technology. And they expressed concern about added requirements that providers report quality of care data.

Policy makers are counting on the technology to prevent medication and other treatment errors, spur use of the most effective treatment practices and eliminate duplicative medical tests of various kinds. They hope it will help bring Medicare and Medicaid costs under control. But the health system has a long way to go to adopt IT and use it effectively.

The administration issued two proposals: one by the Centers for Medicare and Medicaid Services (CMS) in which the agency spells out what providers must do to receive bonus payments in stage two; and the other by the Office of the National Coordinator for Health Information Technology at HHS defining standards and criteria for certified electronic health records (EHRs). Providers have to make meaningful use of certified records to get bonus payments.

Burch lauded the administration for proposing to give providers two years in each stage of meaningful use before they have to comply with a higher stage. Previously, industry feared that a provider might have as little as a year in one stage before having to meet the requirements of the next stage.

The proposal also makes clear that if a provider became a stage one health IT user in 2011, it has until Oct. 1, 2013, before having to meet stage two requirements. Previously, the administration was giving those providers only until Oct. 1, 2012, to comply with stage two. "That gives them a little breathing room," said Tom Leary, an official with the Healthcare Information and Management Systems Society. Leary added that some of the requirements to show meaningful use have been consolidated, making them less burdensome.

The HHS certification proposal would reduce costs for providers by clarifying that they do not have to purchase certain software modules, hospital lobbyists noted. Doctors and hospitals have some options over which information they must make available electronically. They can pick from a menu of requirements to meet.

Under current law, they have had to buy software to meet all the requirements. Thus hospitals have had to buy modules to provide data electronically to state agencies that aren't yet prepared to receive it, says Chantal Worzala, director of policy at the American Hospital Association. Under the proposal they would no longer have to do so if that's not how they chose to demonstrate meaningful use.

The CMS proposal also aims to spur the electronic exchange of information between providers, and between providers and their patients. That drew praise from consumer advocates.

The proposal "has the potential to advance the use of technology to coordinate care across providers," said Christine Bechtel, vice president of the National Partnership for Women and Families. So when a doctor refers a patient to another doctor outside her medical practice, for example, she must transmit electronically to the new provider a summary of the care her patient has received. The proposal requires that in at least 10 percent of the cases in which a patient is referred to a care setting not affiliated with the referring provider, the care summary must be transmitted electronically using "interoperable" computer systems that can communicate with each other.

Bechtel said that standards for electronic transmission of data to patients would be tightened to include timely access to lab results, a list of prescription drugs the patient is taking and demographic information.

"We are pleased that it will allow patients to send secure electronic messages to their doctors—that is long overdue," she said. However, she expressed fear that providers would try to "gut" proposed requirements that a fixed percentage of patients get their medical data electronically.

For their part, providers say CMS is premature in proposing electronic data transmission for an expanded set of clinical quality measures. Worzala said hospitals have had difficulty submitting such clinical data in phase one because CMS has been unclear about exactly what clinical information it wants or has asked for information not contained in electronic health records. "We think we need to fix what's broken" before expanding the set of measures, Worzala said.

Worzala added that a "a major concern" for hospitals is a part of the proposal that lowers payments in 2015 if providers are not "meaningful users" of health IT in 2013. Hospitals had thought that the penalties hinged on whether or not they are meaningful users in 2015. "We think it's inappropriate to accelerate it by two years," she said.

By Jane Norman, CQ HealthBeat Associate Editor

February 28, 2012 -- Two state insurance commissioners recently said despite the latitude the Obama administration is giving states in developing initial essential health benefits, they expect eventually the packages will be more uniform throughout the country.

Kansas Commissioner of Insurance Sandy Praeger and Rhode Island Health Insurance Commissioner Christopher Koller praised the administration for giving states flexibility in prescribing benefits for individual and small group plans that will be sold through health insurance exchanges. Department of Health and Human Services officials have said that in 2016 they will re-evaluate the process for putting together the benefits packages.

The decision to at first give flexibility to the states was a "prudent one from a time standpoint," said Praeger, a former head of the National Association of Insurance Commissioners. But as time goes on, "from a fairness standpoint we want all Americans to have access to the same level of benefits. That's the balanced federalism approach."

For right now, what's most important to HHS leaders is getting the health care overhaul law on its way to full implementation by 2014, said Praeger. "In the political environment that we're in, they just want to get a law enacted and create as few pressure points in the public debate as possible," she said.

Koller called the move by HHS Secretary Kathleen Sebelius a "brilliant political decision."

Both also encouraged patient advocates—worried that benefits might be uneven from state to state—to continue to closely monitor regulatory activities at the state level, as well as local insurance industry lobbying. Insurance regulators are having trouble with finding common definitions for the benefits to be offered, they said.

Praeger and Koller spoke on a panel at a forum on essential health benefits organized by the American Cancer Society Cancer Action Network, along with Karen Pollitz, a senior fellow at the Kaiser Family Foundation and a former top HHS official, and Joel Ario, managing director of Manatt Health Solutions and former director of the office of exchanges for HHS.

The health care law (PL 111-148, PL 111-152) includes a list of 10 categories of benefits that must be included in the individual and small-group plans that will be sold through exchanges in the states.

However, HHS has come under some criticism for issuing a bulletin in which the department proposes to allow states to choose among existing plans on which to model their benefit packages. Those benchmark plans could be the largest plan by enrollment in any of the three largest small group insurance products in the state's small group market, any of the largest three state employee health benefit plans by enrollment, any of the three largest national Federal Employees Health Benefits plans by enrollment or the largest commercial non-Medicaid Health Maintenance Organization in the state.

Plans Do Differ by State

Pollitz said most benchmark plans are "pretty solid" but there are variations state to state that are already apparent when the details are examined. Plans in some states cover only generic prescription drugs but not name brands, for example. In other states there are limits on coverage for injectable drugs, which is important for cancer patients. There are limits on specific services, such as transplants covered only up to set dollar amounts.

"I think it is going to be very important for states' decision makers to really take a hard look," she said. Insurers also can modify their own policies as long as policies overall provide the same value, and it's going to be important for states to oversee and regulate those changes, she said.

Appearing earlier at the forum, Sebelius said health insurance traditionally is sold, marketed and regulated by states, so it made sense to let states develop the benefits packages. She said she understands advocates' fears that some states will offer richer packages than others. "I have to tell you, having looked at thousands of plans, that isn't what we're finding," she said, adding that the benefits don't vary so much as do the co-pays and cost sharing.

"We will be watching very closely to make sure the right consumer safeguards are in place," she said. But she said that states also will be able to get plans up and running by 2014 that already have been scrutinized by regulators and sold in the marketplace, "and that's very important as opposed to people starting from scratch with something they've never seen and trying to figure out how to get that working in an exchange," Sebelius said.

Plans must cover all the benefits mandated by the law and "no plan can provide coverage that protects one group and leaves another out in the cold," she said.

Public comment will continue to be solicited on the benefits packages. Sebelius told reporters after her remarks that a proposed rule will be issued yet this year though she said she couldn't pinpoint a specific date.

Praeger, a Republican elected official, indicated she is having a rough time with implementation of the health care law in her GOP-controlled state, joking she is regarded as a "RINO"—the nickname for a "Republican In Name Only."

One question that's not yet been answered is who will decide which benchmark is picked, she said. "I am in one of those 26 states that is challenging the law," Praeger said. "Our legislature is in denial in terms of moving the ball forward. Our governor is not willing to come to the table. At some point before the November election, by the way, they are going to have to at least make some decisions around implementing the Affordable Care Act."

If the state refuses to develop its own health benefits exchange, the federal government will step in and do so, she pointed out, and state leaders would be giving up control of it. "The same folks that are so opposed would also be the same folks that would not want to give up control at the state level," she said. "It's a bit of an irony."

By Jane Norman, CQ HealthBeat Associate Editor

March 2, 2012 -- States and the federal government should pass laws giving consumers more legal protections when it comes to popular "workplace wellness" programs that make health insurance more costly for employees who are deemed unhealthy, says a new report by the Georgetown University Health Policy Institute.

Federal workplace wellness regulations first put in place in 2006 were expanded in the health care law (PL 111-148, PL 11-152). The authors of the report were uneasy with the potential of the regulations to punish people who are in poor health or coerce them into inappropriate fitness and weight-loss programs. Poorly designed programs might discriminate and shift higher health costs on to those who can least afford them, they say.

Added consumer protections are especially important because there is not enough evidence to show that workers will take action to improve their health if faced with financial penalties, say authors JoAnn Volk and Sabrina Corlette, whose work was funded by the Robert Wood Johnson Foundation.

Employers scored a win in the health care law when legislators agreed to allow them to vary health insurance premiums depending on how well workers did in meeting health standards.

Current regulations allow companies to apply penalties or rewards of up to 20 percent of the total cost of an employee's health coverage, based on whether the employee can achieve a specific goal—for example, a certain BMI, or body mass index, a formula based on height and weight.

Under the new health care law, beginning in 2014 the penalty or reward can rise to as much as 30 percent. The secretaries of Health and Human Services, Labor and Treasury are authorized to increase it to 50 percent. Those with "medical conditions" can be exempt, but they have to provide verification of their condition.

Volk and Corlette note that the rewards can take the form of premium discounts, lower deductibles or waivers of cost-sharing. The penalties could be higher premiums, higher deductibles and higher cost-sharing.

Sometimes it can go awry and in places where you wouldn't expect. One example in the report is of a workplace wellness program at an unnamed physician-owned health care system in Wisconsin where workers have to pay higher premiums if they can't meet goals or refuse to take part.

One woman was unable to meet the BMI standard and her family's premiums increased from $175 a month to $320 a month, even though she had Type 1 diabetes and was breast feeding. Her employer reduced her weight-loss goal but her doctor advised she shouldn't try to lose weight. The employer refused to exempt her and required that she work out with a trainer at the company gym for 130 minutes a week at her own cost, the report said.

Yet the researchers say that studies on whether this kind of approach works are inconclusive. Some limited studies show that some financial incentives help people meet their goals, they say. But none involved the use of such incentives in connection with health insurance.

In addition, penalties may not be effective with people with the worst health—including women, low-income people and minorities—because they often have high job stress, long working hours and multiple jobs, all of which combine to make it difficult for them to go to a gym or eat healthy foods, say Volk and Corlette.

They're also worried about workplace programs that demand sensitive personal information from people, or may violate anti-discrimination laws. For example, they say that the Equal Employment and Opportunity Commission is looking at how far employers with workplace wellness programs can go without violating the Americans with Disabilities Act, which bars discrimination against people with disabilities.

Volk and Corlette say that the departments of Labor, Health and Human Services and Treasury have indicated they are considering additional consumer protections. And states could move as well. The federal government could, for example, take a look at whether it's a good idea to increase the percentage of how much workers can be penalized for not meeting targets, as allowed under the health care law. Federal health privacy rules could be amended to require that when workplace wellness programs are implemented, health insurance covers the services that workers need to meet their goals, like nutrition counseling or disease management for diabetics, the researchers say.

States might want to promote the use of evidence in workplace wellness programs by requiring that programs report on the amount, timing and duration of any incentives, they also say. Some states already have taken action to further protect consumers. Colorado, for example, requires wellness programs to be accredited by a nationally recognized nonprofit.

By Rebecca Adams, CQ HealthBeat Associate Editor

February 28, 2012 -- The Obama administration is slowly vetting candidates to serve on the controversial Independent Payment Advisory Board (IPAB) that House Republicans plan to soon vote to repeal, Health and Human Services Secretary Kathleen Sebelius recently told Ways and Means Committee members.

"Active discussions are under way about those possible candidates," Sebelius said. "Vetting those folks is not an easy task because this must be a full-time job."

The 2010 health care overhaul law (PL 111-148, PL 111-152) created the IPAB. But even some Democrats say that they would vote to kill it. The commission is supposed to issue recommendations to Congress to cut Medicare funding when the program's spending growth is higher than targets that the law sets out. The board's recommendations to cut future Medicare spending would take effect unless Congress acts to override the board's decisions in an up-or-down vote. The House Energy and Commerce Health Subcommittee is scheduled to meet this week to mark up repeal legislation (HR 452), which is sponsored by Rep. Phil Roe, R-Tenn., and has enough votes to pass the GOP-led House.

There is no real rush for the administration to nominate the members that it would like to seat on the commission because they have to be confirmed in the Senate, which is unlikely to do so before the fall elections. Also, the board is not expected to issue its first cost-cutting recommendations until at least 2018.

Sebelius reminded Budget Committee Chairman Paul D. Ryan, R-Wis., that because Medicare spending has been lower than projected when the health care law was passed, "IPAB is really not likely to be operational into 2018 or 2019."

Because Medicare spending has been lower than expected, the Congressional Budget Office (CBO) estimated last year that the commission would not be called upon to issue cuts until about 2018.

The fact that the administration is trying to persuade candidates to serve on the board is another indication, however, that President Obama is not backing away from IPAB despite its unpopularity with even some members of his own party. The president's fiscal 2013 budget calls for IPAB to hold Medicare spending even lower than the health care law requires, even though the Centers for Medicare and Medicaid Services actuary has said that the cuts in the law are already so deep that Congress probably will not allow some of them to take effect. The budget proposes modifying the trigger for the board to make recommendations, which is set at gross domestic product per capita growth rate plus 1 percentage point beginning in 2018. The budget plan would reduce that 1 percentage point by a half, forcing the board to offer proposals sooner, as Obama suggested in his deficit reduction plan last fall.

The move to repeal IPAB has less of a chance to pass in the Senate, which is home to the board's biggest defenders, such as John D. Rockefeller IV, D-W.Va. A similar repeal bill (S 668) in that chamber, sponsored by Texas Republican John Cornyn, does not yet have the votes to pass.

Sebelius' comments about IPAB came in a wide-ranging hearing based on the 2013 budget proposal. Lawmakers also quizzed her about Medicare Advantage reductions, which Sebelius agreed represent about 4 percent of the cuts that are expected to affect the program in the next few years.

Sebelius also defended the administration's contraception policy, saying that the agency is moving ahead on plans to forge a compromise on contraception. She is meeting with groups representing a wide range of views about the next steps, she said.

The secretary also was asked whether the health care law gives HHS the authority to create a federal exchange. Sebelius told lawmakers that the agency does have power to create an exchange and plans to use it.

By Nellie Bristol, CQ HealthBeat Associate Editor

March 2, 2012 -- New Hampshire will receive a federal grant for home- and community-based, long-term care under Medicaid, Centers for Medicare and Medicaid Services (CMS) officials recently announced.

It is the first state to receive such funding, which totals $26.5 million over three years and was authorized in the health care overhaul (PL 111-148, PL 111-152). The money is distributed in the form of enhanced federal matching payments under the joint federal/state program. A total of $3 billion is available to states from Oct. 1, 2011, to Sept. 30, 2015. A CMS spokesman said other states are interested in the grants and the agency is reviewing an application from Maryland.

Known as the Balancing Incentive Program, it's an effort to increase the proportion of Medicaid long-term care dollars spent on home and community-based services compared to funding for institutional care. To be eligible, a state must now spend less than 50 percent of its total Medicaid long-term care funds on community-based options. States are required to outline plans for expanding services and making structural changes to their delivery systems.

"While federal Medicaid law requires states to pay for institutional care for the elderly or persons with disabilities who may need assistance with activities of daily life, home or community-based long-terms supports are optional," CMS says in a press release. "All states, however, operate home- or community-based option programs in Medicaid but demand frequently exceeds the state's available resources."

Nancy Rollins, New Hampshire associate commissioner and director of community based care services, said in a press call this past week that the state has been expanding home and community-based options for a number of years and was "thrilled" with the grant. "We are absolutely committed to consumer directed care, offering more choices...opening up the possibility that all consumers and their care givers can have the supports they need to live in the community," she said.

In 2009, 41 percent of New Hampshire's Medicaid long-term care funding went toward home and community-based care, state officials said. They hope that in 2013, the percentage will increase to 47 percent.

Although Medicaid has an institution-based bias arising from its original 1965 long-term care coverage mandates, MaryBeth Musumeci, an analyst with the Kaiser Family Foundation Commission on Medicaid and Uninsured, said states and the federal government have been "really pushing to rebalance their spending" between home and community-based and institutional care.

Not only is community care more consumer friendly and cheaper, she said, the Supreme Court ruled in 1999 that disabled people should be allowed to remain at home or in the community if they are able and chose to do so. To further the trend, the health care overhaul included several options for states to expand access to home and community-based services under Medicaid. Nonetheless, state adoption of the new opportunities has been uneven, Musumeci said, because they are grappling with a number of new requirements under the overhaul and because of continuing uncertainty about the law's future.

By Emily Ethridge, CQ Staff

February 29, 2012 -- The Senate Budget chairman entered last week's hearing about curbing Medicare spending as a skeptic, but he left optimistic that viable options exist.

"This is the most encouraging hearing on health care I've been part of in probably five years," said Kent Conrad, D-N.D. "I really think we're on the brink of finding a way forward, and I'm really encouraged by it."

Medicare's current fee-for-service system has long been blamed for the program's rapidly increasing growth rate in spending. The three expert witnesses at last week's hearing called for a structural overhaul of the payment system, saying that it encourages patients and providers to prioritize quantity over quality of services.

"If we don't get incentives right, everything else is commentary," said Len Nichols, a professor of health policy at George Mason University. He offered several suggestions but noted there are no "silver bullets."

Conrad said that changing that system, as well as the tax treatment of health care, could help reduce overutilization of services.

David Cutler, a professor of economics at Harvard University, said that one-third of all medical spending is not associated with improved health, amounting to more than $100 billion in Medicare each year. He called for aggressively implementing new information technology, expanding demonstration programs that have proven to be successful, and bringing down administrative costs.

James C. Capretta, a fellow at the Ethics and Public Policy Center, said Medicare premiums should be based on competitive bidding, with the traditional fee-for-service system vying with private health plans for beneficiaries. The government contribution for Medicare would vary by geographic region and whether beneficiaries would have to pay more to remain in the fee-for-service system would depend on the bids.

Such a dynamic marketplace within Medicare is preferable, Capretta said, to more government regulation and demonstration programs built on current rules. Capretta pointed to the success of the market-based Medicare Part D prescription drug program as evidence that such a system could work.

"Medicare is a big part of the problem and the solution is not actually more government micromanagement, but actually a functioning marketplace," said Capretta, who is a former committee staffer.

Conrad was encouraged by the recommendation for more competitive bidding within a Medicare marketplace. "I am personally convinced of what you just described," he said.

As usual, Democrats and Republicans split on the ability of the 2010 health care overhaul (PL 111-148, PL 111-152) to reduce spending.
Conrad said that the law was a good start, but more needs to be done. He also noted that the GOP goal of repealing the law would be costly.

"We need to build on reforms already in place and find further savings in health care," he said. He praised the law's promotion of bundled payments, accountable care organizations to better coordinate medical services, comparative effectiveness research to determine best treatments, and the new Center for Medicare and Medicaid Innovation as ways to contain costs.

But ranking Republican Jeff Sessions of Alabama said the law failed to address the long-term sustainability of the entitlement program, and he criticized President Obama for not offering more proposals.

"His budget shows no leadership in addressing the cost of Medicare entitlements, now or in the future," Sessions said.

Nichols said the law would be improved with two features: changing the medical malpractice liability system and overhauling the formula Medicare uses to determine its reimbursements to physicians. In addition, he said the Center for Medicare and Medicaid Innovation should create an initiative on community-wide improvements to payment and delivery systems.