By Rebecca Adams, CQ HealthBeat Associate Editor

November 9, 2012 -- State officials interested in running their own health insurance exchange or partnering with the federal government will have more time to give the Department of Health and Human Services information about the type of marketplace they want, according to a letter Secretary Kathleen Sebelius recently sent to governors.

States had faced a Nov. 16 deadline to submit their applications to HHS officials if they want to operate a state-only exchange. Instead, states will still have to notify HHS by Nov. 16 that they hope to run their own exchanges. But they will have until Dec. 14 to send in their blueprint document, which asks for specifics on how the market will be operated and overseen.

States that want to partner with federal officials on an exchange will not have to meet the Nov. 16 deadline at all. HHS officials will make approvals on the partnerships on a rolling basis. Feb. 15, 2013 is the final deadline for states to send in a declaration letter and the application.

Officials in several states had indicated last week that HHS would delay the deadlines.

Under the health care law, enrollment in the exchanges is set to begin in October 2013 with the new marketplaces due to be up and running in January, 2014. Federal officials expressed confidence late last week that the deadline changes would not push back that timetable.

In states without state-run exchanges or partnerships, the federal government will step in and establish a marketplace.

States that initially decide not to participate in the exchanges can apply in later years.

"We have heard from many states that additional time would allow you to submit a more comprehensive, complete blueprint application for your exchange," said the two-page letter.

By Rebecca Adams, CQ HealthBeat Associate Editor

November 7, 2012 -- Now that President Obama has been reelected and Congress has no chance of repealing the health care law, much of its implementation will be affected by the decisions of state officials. Starting next year, 30 states will have Republican governors—the most control either party has had in a dozen years.

Many of those GOP governors are philosophically opposed to the 2010 health care law (PL 111-148, PL 111-152), including the idea of expanding Medicaid. And thanks to the Supreme Court's ruling on the overhaul, states will be able to decide whether to broaden the program in their states.

So far, six GOP governors, all of whom remain in power, have said that they would not expand the health program for the poor. Others have been waiting for the results of the election to decide. For those governors who haven't committed, what to do about Medicaid will likely figure high on their agendas come January. And now that it is clear that Obama will press ahead on implementing the overhaul, state officials are already hearing pleas to make a decision.

The governors will face tremendous pressure from medical providers, including hospital officials, to bring more people into the Medicaid program. Most providers aren't fans of the rates that Medicaid pays, which usually are less than those paid by Medicare or private insurance, but it's better than the little that they would get from uninsured people.

Gail Wilensky, who ran the Medicaid and Medicare programs under President George Bush, said that despite any ideological opposition to expansion, most states will have a hard time saying no to the Medicaid expansion because the federal government has pledged to pay unusually high matching rates for people who are newly eligible. For the first three years, the federal government will pay all of the costs for people who gain eligibility under the law. The matching rate will gradually decline after that but is not supposed to ever fall below 90 percent.

"Historically when the federal matching rate has been high, not even 100 percent, there's been an overwhelming move in that direction," said Wilensky. "The only rationale for it not happening is either states don't believe the feds will really come up with 100 percent of the money or they take the position that 10 percent of a big expansion is still a lot of money" after the matching rate phases down.

A major question is whether the Obama administration has the authority and the interest in allowing states to do a partial expansion. The law says that states can get a higher matching rate if they expand the program to people earning up to 133 percent of the federal poverty line. Separately, the law offers federal subsidies to people who want to buy private insurance in the new exchanges if their income falls between 100 and 133 percent of the poverty level.

Policy makers in many states have asked the Centers for Medicare and Medicaid Services (CMS) if they can expand Medicaid to people up to the poverty level, but keep those with incomes between 100 percent and 133 percent of the poverty level out of the program and instead steer them toward buying subsidized insurance in the exchanges.

CMS officials have not yet ruled on that question, and policy analysts are divided on whether the agency has the power to allow it.
One thing that is clear after the elections is that the 2010 law is here to stay.

"We've moved out of the cloud of uncertainty," said Matt Salo, executive director of the National Association of Medicaid Directors. "The path forward may not be easy but it certainly got a lot clearer. The Affordable Care Act is here and it's now a question of implementing it."

Governors' Decisions

Wilensky said that pressure from providers to expand the program is "hard to resist because the argument is, 'Hey, guys, you're not paying anything for this.' Saying no just on principle seems pretty brutal to your friendly providers."

She predicted that a "relatively small number" of states will be holdouts.

But states do have some leverage. The Obama administration is clearly interested in having as many states as possible expand the program. To make things easier, administration officials have said that states that try the expansion can drop out later if they want. States can also choose when to expand so that they don't have to be ready on Jan. 1, 2014, although the full federal matching rates are only available during the first three calendar years.

Many states are seeking to use that leverage to get the federal government to agree to a partial expansion.

That would save money for states but not the federal government. The Congressional Budget Office has estimated that every newly enrolled Medicaid beneficiary would cost roughly $6,000 for those enrolled in Medicaid but about $9,000 if they get coverage in the exchange.

The Supreme Court ruled in June that the federal government could not penalize states who don't expand by taking away all of their Medicaid money, which made it more of a realistic option for states to say no.

"It seems to me that if expanding is voluntary, expanding partway would be voluntary," said Wilensky.

Salo agrees.

"You can find the authority to do anything you want to do," he said. "Yes, I think they can. Will they? Do they want to? That's a different question."

Alan Weil, executive director of the National Academy of State Health Policy, said he has studied the law's wording carefully.

"It's not permitted under the law so I don't know why people would hold out hope for this option," said Weil. "The law doesn't say expansion is up to whatever level the state sets. This is not a part of the statute where states are authorized to set their own eligibility levels."

Governors' decisions could be swayed by the tenor of the deficit reduction debate in Washington. Some governors believe that Congress will look at Medicaid as a source of funds in future deficit reduction talks. That could reduce their interest in expanding the program.

There is one way to save federal money in Medicaid that might seem relatively painless compared to other options: Congress could delay the implementation of the health care law, considering that most states may not be ready by next October, anyway, to start enrolling people in programs that would be effective on Jan. 1, 2014. But if Congress does not take that step, the federal government and state officials will be involved in intense negotiations over the details of implementation, particularly the questions about partial expansion.

"There will be a very complicated Kabuki dance that will go on for months, trying to maneuver around who's got leverage," predicted Salo. "A bunch of states clearly want to do a partial expansion and we have an administration that clearly, for lots of reasons, doesn't. At some point the dance will lead to either states capitulating and saying, 'Ok, fine we'll do it,' or a number of states saying no, at which point I think the Obama administration has to say, 'Ok, we'll take half a loaf rather than none.' Until we reach that tipping point, we'll see this dance."

By Caitlin McGlade, CQ Staff

Physicians new to the profession rack up higher costs than their more-experienced counterparts, according to a study released by the RAND Corporation.

Published in the November edition of Health Affairs, researchers found that physicians with fewer than 10 years of experience accumulated 13.2 percent higher overall costs than physicians who have worked for 40 or more years.

The findings, which looked at Massachusetts insurance claims from 2004 and 2005, might not bode well for the least-experienced physicians now practicing under the scrutiny of quality and resource utilization reports, which are calculations that Medicare and commercial health insurance companies are increasingly making to compare the scope and cost of resources that individual doctors use when treating a patient.

A law passed in 2008 (PL 110-275) required the Centers for Medicare and Medicaid Services (CMS) to provide such reports to doctors. Now, CMS is using a round of reports issued to doctors in groups of 25 or more in nine states to preview value modifier proposals—which the health care overhaul requires Medicare to phase in and apply to Medicare fee-for-service payments starting in 2015.

"I was actually quite surprised that the younger physicians did have higher costs," the study's author, Ateev Mehrotra, said during an interview. "When we talk about what's driving health care spending up, we talk a lot about defensive medicine. I thought what I would find was that physicians who had been sued would practice more defensively, and they'd be more expensive."

Mehrotra had also hypothesized that doctors working in smaller practices would incur higher costs because larger practices have more resources at their disposal.

"We didn't find that," he said.

Instead, they found what Mehrotra could only attribute to a difference in practice methods, perhaps born of the type of training residency programs teach today that they weren't decades ago. For example, young physicians might be more familiar with new types of positron emission tomography (PET) scans, and thus be more likely to order them for a patient, he said. PET scan costs range from $850 to $4,000, according to the Society of Nuclear Medicine and Molecular Imaging.

Mehrotra's research points out that the medical training difference theory is only a suggestion, and the team cannot be certain what mechanisms are driving the spending gap. His study also did not assess quality of care between the cost differences.

"There have been some calls recently that we need to add to our residency school training a more judicious use of resources," Mehrotra said. "Our paper might accelerate that kind of training."

Molly Cooke, who heads the University of California, San Francisco Academy of Medical Educators, is one of the leading voices calling for such a change. She published a paper in the New England Journal of Medicine in 2010 pointing out medical education curricula's "silence" on the role of cost while planning treatment strategies.

"The idea in American medicine is that more is always better," Cooke said, adding that this is not always true.

In 2010 she suggested that the medical community should stop "hiding behind the myth" that every doctor should call for unlimited resources to treat every patient for even minimal potential benefits. She also wrote that doctors should assess the cost value of treatments, and that medical training programs should broaden their curricula to expose fledgling doctors to health care management and health services delivery.

More Focus on Costs

But just two years later, much is different. So much so that Joanne Conroy, chief health care officer at the Association of American Medical Colleges, said Mehrotra's findings might look different if he studied doctors coming out of school today.

The study surveyed insurance claims from 1.13 million Massachusetts-based patients between the ages of 18 and 65 from 2004 and 2005. Researchers broke up the claims into ailment groups and compared how much it cost doctors within a pool of about 12,000 to treat the problem, from first visit to follow-up appointment. The doctors in the group, all Massachusetts-based, were mostly male, board certified and educated in the United States.

Mehrotra plans to further his studies by including a larger study area.

"Since then, there's been really a very heightened focus on actually training residents not only how to work in medicine, but understanding resource utilization," Conroy said during an interview. "And we're even having discussions about when it is important not to do something."

The Accreditation Council for Graduate Medical Education now stipulates that post-medical school training programs accredited by the council must teach an understanding of the financial end of medical tests and prescriptions. The ABIM Foundation launched a "Choosing Wisely" campaign that outlines five common and costly tests or procedures whose necessity should be considered. The American College of Physicians, triggered by an Institute of Medicine report that revealed about 30 percent of health care costs are spent on avoidable treatment processes, developed a curriculum centered around analyzing actual patients' hospital bills.

Cooke said the Massachusetts health care law and the federal overhaul (PL 111-148, PL 111-152) necessitated these industry shifts, which has created a vastly different climate in residency training programs than what she experienced during her training decades ago.

"To broaden access was quite obviously forcing the cost questions," Cooke said. "But we were taught [in school] that it was incorrect for physicians to consider cost in devising diagnostic and therapeutic treatment for patients, so I wanted to reopen that question and say, 'Is this really true?' "

Cooke said she's not "as optimistic" as Conroy about the results of cost-analysis training having as significant of a difference already between 2004 and 2005 and now. The dynamic between doctors and patients will need to change, she said.

"Patients have become—and overall I think this is a good thing—more activist about their care," she said. "Physicians are much more frequently confronted by a patient who's ripped an ad out of a magazine or seen an ad on TV that says 'Talk to your doctor about, say, male pattern baldness.' I don't think we have really taught very well how to manage that. . . . I remember being sort of shocked when we began to see what were obviously direct advertisements encouraging patients to ask for specific medications. When I went to medical school that absolutely didn't exist."

By Jane Norman, CQ HealthBeat Associate Editor

November 8, 2012 -- The end of a presidential campaign that pitted two competing visions of Medicare against each other has cleared the way for a new struggle over how—and whether—changes to the massive health program might be rolled into a "grand bargain" for deficit reduction, according to health policy experts.

One of the first signs of that emerging debate came when the National Coalition on Health Care released a lengthy plan that offered a series of tough policy recommendations to cut spending, raise revenue and continue to shift Medicare away from its fee-for-service roots. Coalition members include a heavy-hitter list of provider groups, insurers, pharmacies,and advocates for seniors.

John Rother, a former top official with AARP who is now CEO of the coalition, said the document will be delivered into lawmakers' hands, and the hope is it will shift the focus away from blunt cuts to a system overhaul. "We are anticipating a major deficit reduction effort next year which will focus on Medicare," Rother said in an interview. "Here's the path that would be preferable."

The 2010 Simpson-Bowles commission and President Obama's own list in September 2011 of $248 billion over 10 years in cuts to health care entitlement programs, including premium increases for higher-income seniors and Medigap surcharges, could provide other starting points for discussion.

Another option is to gradually increase the Medicare eligibility age from 65 to 67, which doesn't produce major savings but might lower spending by about 5 percent over the long term, the Congressional Budget Office says. Obama has said he's willing to consider it.

Perhaps most telling are Obama's comments in an interview with the Des Moines Register—originally off the record—shortly before the election during which he said the central ideological argument in Washington is "how much government do we have and how do we pay for it?"

Obama added that "in the first six months we are going to solve that big piece of business" and it would include working "to reduce the costs of our health care programs."

Yet similar attempts have failed in the past, and some longtime health policy experts are skeptical that lawmakers will be able to substantially change the Medicare program and curb its rate of spending growth. That group includes Joe Antos of the conservative-leaning American Enterprise Institute.

Antos, a health care economist, said in an interview that he expects the economy to improve in 2013, brightening the fiscal picture and taking the pressure off Congress to slash spending and revamp Medicare—especially given the political sensitivity of touching a "third rail" social program.

"All I'm saying is politicians will continue to act like politicians and ignore the big problems we have," Antos said.

Gail Wilensky, a former Medicare administrator under President George Bush, also isn't convinced a Medicare overhaul will occur. "It'd be really good if they made Medicare more financially viable over the next few decades," but most of the money available to trim in the program already was captured through the health care law (PL 111-148, PL 111-152), Wilensky said.

On Obama's left, liberals and progressives will be resistant to changes that affect beneficiaries, and they sent signals as soon as the votes were counted. "Any grand bargain that includes beneficiary cuts to Medicaid, Medicare or Social Security is no bargain for the middle class," Ethan Rome, head of the group Health Care for America Now, said in a written statement the morning after the election.

In April, Medicare trustees reported that the hospital insurance trust fund will be insolvent in 2024, the same date as was projected a year earlier. Under current law, scheduled hospital insurance fund tax income would cover only 87 percent of estimated expenditures in 2024.

In the presidential campaign, Republican candidate Mitt Romney outlined a premium support plan for Medicare that would give beneficiaries a set amount of money to purchase either a private plan or traditional Medicare. Democrats labeled it "vouchercare," the public gave it a thumbs down in polls and Obama said his health care law already is making needed financial and system changes in Medicare, including $716 billion in slowing cost growth over 10 years by instituting spending reductions for providers.

Romney's defeat has swept away the viability of the premium support plan, experts said. Now, "the interesting issue is how serious the country is going to get about Medicare program reform," said Sara Rosenbaum, professor of health law and policy at George Washington University. Rosenbaum said she believes the preservation of the health care law makes it easier for lawmakers to consider raising the eligibility age, since people 65 to 67 could obtain health insurance through the state-based exchanges.

With the nation at the edge of a "fiscal cliff," lawmakers are expected to return to Washington for a lame-duck session later this month and consider some kind of deficit reduction agreement, although they're just now making their opening bids and the final impact on Medicare is unclear.

Sequester Would Affect Medicare

Included in the sequester due to kick in Jan. 1 are automatic cuts for Medicare reimbursements for doctors and hospitals. Congress also must address a scheduled 27 percent reduction in Medicare doctor payments under the sustainable growth rate formula, which costs $20 billion for a one-year patch.

But health care observers said they believe those are issues for the short term and that systemic change won't come in the lame duck. Health care consultant Brian Fortune, head of the Farragut Square Group and a former House GOP staffer, said it's key to watch during the next two weeks for clues on how talks on Medicare might shape up. He predicted that major moves on the program will emerge next year. "It has to be part of a big 2013 discussion," Fortune said.

Chip Kahn, president of the American Federation of Hospitals, said Republicans have been clear that an entitlement overhaul must be part of any "grand bargain" discussion on taxes and spending, and "I don't think it's likely that in 45 days they'll settle all the biggest issues."

An analysis released last week by the law firm of Alston and Bird underlined that politically difficult choices on Medicare "would almost certainly have to come as part of a larger, bipartisan deficit reduction package involving additional revenues, as neither party will want to step off the ledge of entitlement reform absent such bipartisan support."

The Simpson-Bowles commission's deficit reduction plan presumably would be a starting point, Kahn said. Two big elements of that report are the taxation of health benefits and permanent replacement of the SGR, also advocated in the coalition recommendations. The chairmen's mark produced by the panel offered two options on taxes: either end the current exclusion of employer health care outlays from taxation or scale back the exclusion.

The commission proposal, which didn't attract enough votes from its members to be formally recommended, also included a long-term global budget for federal health care spending that would tamp down yearly growth in spending to GDP plus 1 percentage point. If growth exceeded the target, action would be required by Congress and the president.

Meanwhile, Rother, of the coalition, said he knows behind-the-scenes discussions are under way and he wants ideas on transformational Medicare change to be part of the mix. "It's important to get them into the debate as early as possible," he said of his group's recommendations.

By John Reichard, CQ HealthBeat Editor

November 8, 2012 -- Look for the Obama administration to pretty much put the same health team onto the field in 2013 as it marches closer to the historic start of coverage expansion under the health law a little more than a year from now.

But that doesn't mean the lineup won't change at all.

With the election a scant two days old and the administration's disciplined press operation keeping its metaphorical mouth firmly shut, the usual post-election analysis of possible personnel changes relies heavily on the observations of longtime watchers of, and former officials with, the federal agencies that carry out the nation's health policy.

The end of one presidential term and the impending start of another is a natural point for people to move on. So the utter silence about potential changes may be telling and suggest stability at the top.

Clearly, there are strong reasons to keep the team together after the judicial and election campaign challenges it has successfully weathered. It now has a real shot at actually extending coverage to tens of millions of uninsured Americans after decades of fruitless attempts by universal coverage advocates to do so. There's little or no talk thus far that Health and Human Services (HHS) Secretary Kathleen Sebelius is on her way out, particularly with the possibility that her legacy would be burnished by seeing through the job of implementing the health law if she does stay.

But four years as HHS secretary is a long time. Staying through a second term would be highly unusual. "Only one HHS secretary has stayed on that long, and the job was much easier then," said a former administration official, referring to the tenure of Donna Shalala as head of HHS during the eight years of the Clinton administration. "As for Sebelius, it's hard to say," the former official adds. "She's got a helluva lot of energy and wants to see things through, so I expect she'll stay for at least part of a second term."

The officials who oversee HHS in the White House also are known as steady long-term performers with a deep commitment to the health law. They include Deputy White House Chief of Staff Nancy Ann DeParle and Jeanne Lambrew, deputy assistant to the president for health policy, as well as former Senate Finance Committee staffer Elizabeth Fowler, special assistant to the president for health care and economic policy on the National Economic Council.

It's unclear whether Mike Hash, who also served as part of the White House team and is now director of the HHS Office of Health Reform, will stay on or return to the private sector.

Steadiness is also the hallmark of acting Centers for Medicare and Medicaid Services Administrator Marilyn Tavenner, who has strong ties to the hospital industry, to centrists like Sen. Mark Warner, D-Va., and even to Republicans such as House Majority Leader Eric Cantor, R-Va. With as many as 55 senators in the new Senate part of the Democratic caucus, Tavenner could be a good bet to be confirmed as permanent administrator. That's particularly so if Republicans retreat from their strategy of blocking the health law at every opportunity in Congress after their strategy of trying to repeal the overhaul failed to win them the White House and control of the Senate.

"Marilyn has an excellent shot at confirmation now," says Dan Mendelson, top health budget official in the Clinton White House. "She is a centrist, respected by both sides of the aisle, and would be a good partner in the upcoming discussions of deficit reduction, as well as reform implementation."

That view about Tavenner's confirmation prospects is shared by Tom Scully, who ran CMS during the George W. Bush administration.
Mendelson sums up the likelihood that no major reshuffle is in the works this way:

"Getting the exchanges and the Medicaid expansion up and running is a monumental task, and the pace is accelerating after the election. The health care team has the confidence of the White House, and Nancy Ann is able to control the issues of most importance to her. So while there might be a few tired people leaving and members of the core team being elevated, we are unlikely to see a major shake-up."

Rich Tarplin of Tarplin Strategies, a lobbyist with ties to many Obama administration officials, sees the second term in much the same way. "This is an amazing team that's served four years in the reform trenches, so changes are inevitable," says Tarplin, who served as assistant secretary for legislation at HHS in the Clinton administration. "That's always part of the transition to a second term. But the team has a very deep bench, so there'll be a lot of continuity as implementation moves forward."

What about other agencies?

National Institutes of Health Director Francis Collins and Centers for Disease Control Director Thomas Frieden face the difficult task of potentially having to oversee sharp reductions to their budgets. But Collins is widely viewed as a star and as one who loves his job. And he may be able to hold the budget cutters at bay. Frieden is a similarly passionate public servant and has proven to be a durable fighter in taking on powerful industries during his public health career. Those qualities suggest he would like to stay on.

Mary Wakefield, administrator of the Health Resources and Services Administration, faces a year in which Congress is expected to reauthorize a key program overseen by her agency, the Ryan White program, which funds services and treatments for those with the AIDS virus or full-blown AIDS. But there are no signs that the highly energetic Wakefield has lost any interest in her position and its challenges.

Less certain perhaps is the fate of Margaret Hamburg, commissioner of the Food and Drug Administration (FDA). Running FDA is a highly stressful job. In the past, two years has been about the half life of an agency commissioner.

Longtime FDA watcher Steve Grossman, a former Hill staffer who now runs HPS Group, a health policy consulting firm, said, "I think Margaret Hamburg is probably on solid ground to stay as long as she wants. However, it is not clear that she intends to stay."

Grossman, a health aide from 1979 to 1985 on the Senate Labor and Human Resources Committee, the predecessor to the Senate HELP Committee, added, however, that "there is going to be a significant amount of turnover in the administration. History tells us this is true, no matter how it looks a few days after Election Day. The evaluation of existing personnel is an ongoing process, and we can guess that she is safe, but there is no way to really know."

By Jane Norman, CQ HealthBeat Associate Editor

November 9, 2012 -- The Office of Management and Budget (OMB) is reviewing a proposed Health and Human Services rule that apparently will lay out the requirements for qualified health plans and the minimum standards for essential health benefits in insurance exchanges that the states will run.

In addition, a second proposed rule dealing with the specific regulations governing state health insurance markets also has arrived at OMB, where regulations are reviewed prior to publication. The exact contents aren't yet known, but HHS still needs to propose rules dealing with annual limits, community rating, exclusions for pre-existing conditions and more.

Just because the rules are at OMB doesn't mean they are immediately forthcoming. Sometimes proposals flow fairly rapidly through OMB, and sometimes it takes weeks or even months. However, that seems unlikely in this instance, given that implementation of the health care law needs to move forward.

Few details were available yet, but the appearance of the two proposed rules last week was particularly significant since they emerged just days after the reelection of President Obama. With enrollment in health insurance plans due to start in October 2013, states moving on exchange development have been awaiting additional guidance on the exchanges, the health plans they will market and the essential health benefits that will be included.

Some states have been moving ahead even without clear guidance because of the relatively short time before enrollment will launch.
HHS officials said in their description of the proposed rule on exchanges that it focuses on requirement for qualified health plans and is "implementation focused" on elements such as essential health benefits and oversight of the exchanges.

States that are moving ahead on exchanges recently submitted their benchmark plans for essential health benefits. Under the health care law (PL 111-148, PL 111-152), beginning in 2014, all non-grandfathered insurance plans in the individual and small-group markets have to cover a list of essential health benefits. The plans will be available in the exchanges, which are to be up and running by January 2014.

• Exchanges Proposed Rule 
• Insurance Markets Proposed Rule