By Dena Bunis, CQ HealthBeat Managing Editor

November 16, 2012 -- State officials now will have until Dec. 14 to let the Obama administration know they want to operate their own health benefits exchange, Health and Human Services Secretary Kathleen Sebelius said late last week in a letter to the Republican governors. This second deadline extension in the past week comes on the heels of a request from the National Governors Association for more flexibility and information as states grapple with this key decision.

Without this last minute reprieve, states would have had to tell HHS by Nov.16 if they wanted to operate their own exchanges. Last week, federal officials told states they would still have to make a decision on a state-run exchange by the end of the week but had given them until Dec. 14 to file a detailed exchange plan. And last week states that wanted to do a hybrid state-federal exchange were given until Feb. 15, 2013 to file a letter of intent and a plan.

"We are committed to providing states with the flexibility, resources and time they need to deliver the benefits of the health care law to the American people," Sebelius wrote in her letter to the NGA. "We will continue to work directly with individual states to address their particular questions and concerns." Under the health law (PL 111-148, PL 111-152) enrollment in the exchanges is supposed to start in October, 2013 with the new marketplaces opening for business in January, 2014.

In their letter, the GOP governors had pointed out that state officials were being asked to decide what exchange route to follow before several important rules governing the operation of these new marketplaces have been released. Those includes regulations spelling out essential health benefits and market insurance rules.

In her letter, Sebelius said "additional guidance," presumably meaning those missing rules, will be "released in the coming days and weeks." The rules are now being reviewed by the White House Office of Management and Budget.

The secretary also pointed out to states that whatever their initial decision on whether to run their own exchange, partner with the federal government or defer to HHS to operate an exchange in their state, "a state may apply at any time to run an exchange in future years."

Even as the GOP governors as a group were balking at the deadline, the impending deadline was likely responsible for a flurry of exchange activity in recent days. Four more state leaders in North Carolina, South Carolina, Nebraska and Indiana announced their intentions in advance of the deadline.

Also late last week, New Jersey Democrat, Rep. Frank Pallone Jr. sent a letter to Gov. Chris Christie urging his governor to sign a law the state legislature passed creating a state exchange.

"If New Jersey cedes the opportunity to create its own exchange, our residents will miss out on a number of benefits,'' Pallone wrote to the Republican governor whose office told CQ HealthBeat that Christie had not yet decided whether to sign the measure. "First and foremost, a state-based exchange would allow the state to determine which insurers can participate in the exchange, ensuring that only those offering the highest quality for the best value are allowed to participate. Furthermore, a state-based exchange could set requirements for participating insurance companies above and beyond those set by the federal law, making sure that the unique health needs of New Jerseyans are fully met,'' Pallone wrote.

By Caitlin McGlade, CQ Staff

November 15, 2012 -- While more primary care doctors are adapting to health information technology to track medical records, they're still having trouble syncing with specialists or hospital personnel to get the full picture of their patients' care, according to a recent Commonwealth Fund survey.

The survey compared 10 countries' health systems in terms of patient access, health information technology use, communication, performance and satisfaction with the medical system. Published in the December edition of Health Affairs, the survey asked about 8,500 primary care doctors about their perceptions and experiences.

"Simply put, we don't communicate well in any country in terms of patient flow—it's not patient-centered and it's a challenge," Cathy Schoen, senior vice president of policy, research and evaluation at the Commonwealth Fund, said during a teleconference.

Fewer than 20 percent of doctors in Germany, the Netherlands and the United States said they always received reports from the specialists who saw or treated their patients. More than half of the doctors surveyed in France and Switzerland typically received such reports. Many are still using mail or fax to receive reports, which stalls the treatment process, said Robin Osborn, vice president and director for the Commonwealth Fund's International Program in Health Policy and Innovation.

Using electronic medical records can move communication forward, Schoen said.

As with most other facets of the study, the main difference dividing more frequent use of health information technology and more sparse use depended upon whether the countries had national policies guiding doctors. Ninety-seven percent of doctors in the United Kingdom and New Zealand reported using electronic medical records. Both countries have had electronic medical record policies for years.

The United States is catching up. Sixty-nine percent of the U.S. doctors surveyed reported using electronic medical records compared to 46 percent in 2009. The survey's researchers pointed to a portion of the stimulus package (PL 111–5) as a driving mechanism for the change. The 2009 law allocated $19.2 billion to jump-start the use of electronic medical records, setting up financial incentives for hospitals and doctors to use such systems. And it set aside billions of dollars to create and maintain the necessary infrastructure as well as millions of dollars for research.

Referencing a similar Commonwealth Fund study conducted in 2006, Fund President Karen Davis said the team found that establishing national standards for an electronic medical record system was one of the keys to bringing a country's whole health system on board. Otherwise, individual practices may be reluctant to buy an expensive system, which may or may not become outdated within a few years. The second and third keys included financial incentives and funding and the creation of a health information exchange portal, Davis said.

The issue of interoperability and cost was raised at a House hearing on Health IT.

Davis said she also sees in the near future more primary care doctors teleconferencing with specialists during an appointment with their patient, to answer specific questions immediately.

"For the first time there is the technical capacity when you've done a test to digitally share the results of the test so the next doctor can see the results. Before it required either paperwork or a phone call," Schoen added. "We can, in a virtually connected way, start having practices that were silos before connect each other."

The study found a number of other differences among medical systems that deviated along national policy lines. The United States and Canada ranked the lowest in the study for after-hours care arranged by primary care doctors. Patients in these countries are also more likely to use emergency departments. The U.S. and Canada are the only two out of the 10 without policies about after-hours coverage. Policies in other countries include physician-run cooperatives in the Netherlands, walk-in centers and national help lines in the United Kingdom and payment incentives for physicians who provide after-hours coverage in Australia, according to the report.

The U.S. also ranked the highest in payment problems—59 percent of the doctors reported that their patients often had difficulty paying for care, followed by 42 percent in the Netherlands and 29 percent in France. A little more than half of the U.S. doctors considered the amount of time they spend dealing with insurance coverage a "major concern," compared to 37 percent in Germany and 26 percent in the Netherlands.

The report concludes that the federal health care overhaul (PL 111-148, PL 111-152) creates the potential to free up physician and staff time from insurance business.

"As a nation, we're spending far too much on paperwork," Schoen said. "We need to stop draining resources and redirect it for care."

By Jane Norman, CQ HealthBeat Associate Editor

November 12, 2012 -- The next big hurdle for implementation of the health care law: States must adopt the overhaul's major changes to how consumers purchase health insurance, which are due to take effect in 2014. They are the very guts of the measure's promise of better access to health care.

But tough new standards on guaranteed issue, age rating and more might also provoke a new round of fights in Republican-controlled states where officials have been so resistant to implementing the overhaul that they've refused to set up state health insurance exchanges.

Insurers, health policy experts, state regulators and others are watching to see if proposed rules will be issued soon dealing with insurance market regulations, as well as standards for qualified health plans and minimum standards for essential health benefits. The Office of Management and Budget said recently that the proposed Health and Human Services rules are under review.

Some changes in insurance market rules took effect in September 2010 under the health care law, such as allowing young adults to say on their parents' policies until age 26. States had to adjust to those new rules.

But the new consumer protections that will go into effect in 2014 make much larger changes in the insurance market, such as guaranteed issue for non-grandfathered plans in the individual market. That means insurance companies must issue a health plan to anyone who applies, regardless of their health status or other factors. Now, in most states, insurers are able to deny coverage to sick people or people who have in the past had any one of a number of illnesses.

"It's like a whole new ball game with these [rules] because they are so sweeping," said Sabrina Corlette, research professor and project director at the Center on Health Insurance Reforms at the Georgetown University Health Policy Institute. "And so many states have conflicting laws on the books."

In some states, insurance commissioners and regulators can on their own issue the regulations that will make state policies conform to the federal health care law (PL 111-148, PL 111-152), experts said. But in others, it might require very swift legislative action during the next few months as an Oct. 1, 2013, deadline looms for exchanges to begin enrolling people. To write policies for sale in the exchanges, insurance companies need to know the state rules governing their products.

Lawmakers opposed to the health care law could also decide to block regulatory action, said Sandy Praeger, the Kansas insurance commissioner and the head of a health care committee at the National Association of Insurance Commissioners. In her own state, where GOP Gov. Sam Brownback has opposed establishment of an exchange, "I'm not anticipating cooperation," said Praeger, who predicted troubles in other states where Republican governors and lawmakers continue to oppose the health care law.

However, Joel Ario, the former director of the Office of Exchanges at the Department of Health and Human Services, said he doesn't see a problem and expects states to comply, just as they did when guaranteed issue was mandated by federal law for the small group market in 1996. "They'd be just ignoring federal law," said Ario, now of Manatt Health Solutions. "The broader issue is what will happen in the marketplace and will it be disruptive or not."

In states that refuse to act, it's possible the federal government would have to come in and regulate the insurance market, Corlette said. "I think it's too early to say any states will do that," she said.

The Commonwealth Fund in a study issued in March took a look at what happened when states were confronted with implementing the early changes in the insurance market. The study found that states adopted both formal and informal approaches to requiring or encouraging compliance, though some had to hurry and act without state legislative action because of the quick time frame in which the new rules took effect. But unlike many of those early rules, the 2014 changes do not exist in state law, the study said. And where they do exist, they might more often be inconsistent with federal law. But the study also warned of the need for "continued tracking of state action."

One rule that might emerge and that deeply worries insurers is what's known as age rating. In 42 states, insurers are allowed a five-to-one age band, which means older people will pay no more than five times as much as younger people, says the trade group America's Health Insurance Plans. The health care law reduces that to a three-to-one age band, which means younger people will pay more, says AHIP.

The group has advocated that the law be changed back to five-to-one, which would require congressional action. But Robert Zirkelbach, a spokesman for AHIP, said that how the rule on age rating is structured could make a difference—such as whether there is some kind of phase-in period for it. The other alternative suggested by consumer advocates is for states to move quickly on this particular rule and adopt it by the end of 2012, giving insurers plenty of time to set their rates and submit them to regulators for approval.

By Rebecca Adams, CQ HealthBeat Associate Editor

November 15, 2012 -- Leaders in Nebraska, North Carolina, South Carolina, and Indiana late last week announced their decisions on what kind of health benefits exchanges they want in their states. Federal officials had set Friday as the deadline for states to tell them if they plan to run their own marketplace.

Nebraska Republican Gov. Dave Heineman said in a news conference that while he had first thought it would be better for Nebraska officials to control the exchange, he felt that the 2010 health care overhaul (PL 111-148, PL 111-152) contained so many mandates that it left the state with little discretion about the details of the coverage in the exchange and the operational costs could be too costly. Heineman also confirmed that he would not expand Medicaid.

"The bottom line is a state insurance exchange is really controlled by the federal government" and yet it would be very expensive for the state to operate its own marketplace, Heineman said at the news conference.

The Nebraska Department of Insurance and the Department of Health and Human Services estimated it would cost the state $646 million from fiscal 2013 to 2020 to run its own exchange but only $176 million if the federal government ran it, a savings of $470 million to the state, the governor said.

"Any time you've got the federal government in charge, we should be concerned," he said.

Heineman also said that the state is still waiting for key federal rules to be issued and is frustrated that he has not gotten a response to a Sept. 6 letter he sent to Health and Human Services Secretary Kathleen Sebelius.

"I don't call that much of a partnership," he said.

In North Carolina, Democratic Gov. Bev Perdue announced that her state would pursue a partnership with the federal government.

"North Carolina is moving forward with implementing a process that provides much-needed health insurance for every citizen," Perdue said. "It is critical for our state to participate in decisions that affect our state's citizens. We will not cede total control to the federal government. It remains my goal to pursue a state-based plan."

The North Carolina Department of Insurance and the North Carolina Department of Health and Human Services will work together to implement the exchange, with the insurance department taking the lead. Perdue said that North Carolina missed the chance to set up a state-only exchange by 2014 because the legislature did not authorize it during the last session. Perdue is leaving office in January and will be replaced by Republican Pat McCrory.

The state also was working on a grant application to help provide funding for a partnership or a state-only exchange in the future.

South Carolina officials said they would rely on the federal government to operate its exchange. Gov. Nikki Haley said in a letter to Sebelius that President Obama's re-election has not "changed my original decision: our state should not and will not set up a state-based healthcare exchange."

In Indiana, Republican Gov.-elect Mike Pence did not rule out operating a partnership with the federal government, but said in a letter to Indiana Gov. Mitch Daniels that he does "not believe the State of Indiana should establish a state-based health insurance exchange because doing so will cost taxpayers millions of dollars and it is not clear that Hoosiers would benefit from incurring the cost of implementing this new federal health care bureaucracy. Without knowing more details on the cost and nature of state-based exchanges, it is possible that our state could be placed in the untenable position of serving as the administrator of a new federal healthcare bureaucracy over which we have little control."

Pence said that establishing a state-based exchange would cost the state about $50 million per year.

The consulting firm Avalere Health is making predictions on states' decisions and updating those projections daily. The group's most recent projection is that 17 states will definitely run their own exchanges, one state (Utah) probably will run its own, six states have announced that they will partner with the federal government, 16 states have said they will rely on the federal government and another five will probably rely on the federal exchange.

By John Reichard, CQ HealthBeat Editor

November 16, 2012 -- A proposed regulation giving companies more power to vary premiums and other health care charges based on whether workers meet certain employee wellness program goals has reached the White House Office of Management and Budget—a signal that it might be published soon.

The proposal, which OMB has been reviewing since Nov. 9, has sparked a tug of war between the business community and consumer advocates over how much pressure employers should be able to put on overweight and other employees with unhealthy medical conditions to adopt healthier lifestyles.

In a rare victory for employers in the health care law (PL 111-148, PL 111-152), starting in 2014 companies are permitted to apply penalties or rewards of up to 30 percent of the total cost of their health coverage based on whether workers can achieve a specific wellness goal, such as a certain body mass index, or BMI, a particular blood glucose level, or a certain blood pressure.

In addition, the law empowers the Treasury and Health and Human Services secretaries to increase penalties or rewards to 50 percent.

Employers are hoping that the Obama administration won't try to restrict their flexibility to vary premiums in the proposed regulation.

"My hope is that the 30 percent break in premium will not be restricted," said Neil Trautwein, vice president of the National Retail Federation. "At the very least, I think it was a positive, and even a bipartisan, step forward to encourage greater participation in wellness activities," Trautwein said. "We don't want to see that turned back."

He added that "it's really an important goal toward keeping Americans healthier and spending less on health care and on health coverage."

Trautwein said the 30 percent standard could increase the number of wellness programs but added "they're already fairly widespread, and even in the retail world."

More employers are adopting workplace wellness programs, but most simply provide financial incentives to workers who participate in programs to quit smoking, manage their weight and exercise, according to a study earlier this year by JoAnn Volk and Sabrina Corlette of the Georgetown University Health Policy Institute.

However, wellness programs that require employees to meet certain standards might now become more attractive to employers seeking to cut costs, they said.

Employers who adopt such programs have the power not just to provide rewards if certain standards are met, but also to penalize workers if they fall short, they added.

"Employers can offer premium discounts, lower deductibles and waivers of cost-sharing requirements for employees who do well or, conversely, higher premiums, deductibles or other forms of higher cost-sharing for employees who don't meet the employer's goals," they said.

Volk said in an interview that she's watching the proposed rule to see if the premiums can go up as much as 30 percent or whether the increase will be up to 50 percent. The more premiums can rise, the greater the need for consumer protections, she said.

"If you're going to put a much higher percent of premium in play, that can be a bigger detriment for low- and moderate-income workers," she said. "Thirty percent of their premium could be cost prohibitive."

Volk and Corlette said it's important to establish safeguards to guard against programs that inappropriately punish workers in poor health or programs that are overly coercive.

Regulators should require programs to pay for services such as nutrition counseling, they said. Participants should have a reasonable time to meet program goals, and premiums should not be permitted to become unaffordable.

And safeguards should ensure that programs "do not serve as a subterfuge for health status discrimination or result in adverse selection against health insurance exchanges," they added.

In a consensus statement issued in July, organizations including patient advocacy groups urged that employers be barred from establishing financial incentives tied to whether or not an employee develops a certain illness.

"Instead, financial incentives should be tied only to health status factors that are modifiable for many individuals though changes in health behaviors," the statement said. As examples, it listed weight, cholesterol, blood pressure and tobacco use. The organizations included the American Cancer Society, the American Heart Association, and the American Diabetes Association.

The statement also noted that under current regulations governing financial incentives, an employer must offer a "reasonable alternative" to individuals for whom it would be unreasonably difficult to achieve a health standard because of a medical condition.

"We recommend that employers defer to the views of the individual's health care provider for setting and achieving a reasonable alternative standard," the groups advised federal officials.

By John Reichard, CQ HealthBeat Editor

November 15, 2012 -- Medicare payments "bundled" to spur greater cooperation between hospitals and providers who see patients after they leave the hospital can save money. But getting the reimbursement right could be tricky, a new study suggests.

A bundled payment is one of the forms of payment innovation that policy experts tout as holding promise for playing a part in bending the curve in national health spending.

The study of about 100 hospitals taking part in the "Bundled Payments for Care Improvement Initiative" shows big differences between hospitals in the cost of treatment for patients after they leave the hospital and enter post-acute settings such as home care, skilled nursing or rehab-facility care, said the authors of the study, Robert Mechanic and Christopher Tompkins. Mechanic is a senior fellow at Brandeis University's Heller School for Social Policy and Management; Tompkins is an associate professor there.

"This variation highlights opportunities for hospitals and their partners to improve quality and reduce spending by reaching out to patients after discharge and reconciling medications, scheduling timely primary-care visits, establishing plans for addressing common problems and coordinating with post-acute-care providers," the study said.

The experiment is one of the pilot programs that the Center for Medicare and Medicaid Innovation at the Centers for Medicare and Medicaid Services is funding under the health law (PL 111-148, PL 111-152).

Published in the New England Journal of Medicine, the study said that "hospitals with post-acute-care spending above the median for any particular [treatment episode] spent, on average, about 40 percent more than hospitals with spending below the median. Variation between the lowest-cost and highest-cost hospitals frequently exceeded 100 percent," they wrote.

Hospital readmissions "are one major source of variation,'' the authors found. "For episodes of congestive heart failure, high-cost facilities frequently have readmission rates of approximately 40 percent—10 percentage points higher than low-cost facilities."

Mechanic and Tompkins noted that "hospitals with high post-acute-care spending for total joint replacement tend to use rehabilitation hospitals and skilled-nursing facilities much more frequently than do those with lower spending."

The program tests payments for "treatment episodes" as distinct from conventional Medicare payments in which providers bill for each individual treatment and service involved in caring for a patient.

"Policy analysts have long been interested in encouraging improved efficiency and care coordination by bundling Medicare payments for a range of services delivered during defined episodes of care," the authors wrote. "For example, an episode-based payment for total joint replacement could include the inpatient admission and professional services, plus skilled nursing, home health care and other post-acute-care services for a defined period after discharge."

In October, CMS issued definitions for 48 episodes of care that would be the basis of the program. Other examples include congestive heart failure, chronic obstructive pulmonary disease and pneumonia.

The new forms of payment will not be issued until 2013, but the authors analyzed post-acute spending at the facilities before the start of the pilot.

They warned, however, that a "critical finding of our analysis is that the current design of Medicare's bundled-payment program poses financial risks for participating hospitals." That is because "the relatively small number of patients within each type of episode can lead to substantial year-to-year variation in the severity of illness in, and costs for, patients who require treatment."

They suggested that payments would need to be adjusted in various ways to protect hospitals against expenses involved in treating unusually costly cases.

"CMS has begun to discuss changes to the proposed financial model with applicants," the study said. "If hospitals are confident that the program will financially reward successful clinical performance, many more will be willing to pursue the opportunities for care improvement that this program seeks to encourage."