By Rebecca Adams, CQ HealthBeat Associate Editor

April 19, 2013 -- The benefits for Medicaid recipients already are different from state to state. And in those states planning to expand the health program for the poor under the health care overhaul, people on Medicaid who live next door to each other could pay different amounts to see a doctor and be entitled to different levels of care.

The health care law essentially creates two broad sets of Medicaid beneficiaries: those who qualify under the rules before the overhaul passed and those who are eligible through the law's expansion, most of whom will be adults.

Newly eligible enrollees in some states may have to pay more than current beneficiaries when they get medical services. State officials are just starting to grapple with questions about whether to require that group to pay more than the traditional Medicaid population.

States can charge newly eligible beneficiaries more than the minimal amounts allowed in the traditional program—up to 20 percent of the cost of services for people with incomes above the federal poverty level, which is $11,490 for an individual in 2013.

The Center for Medicare and Medicaid Services currently pay states an average of 57 percent of the costs of treating Medicaid recipients. But in an effort to curb the sticker shock states would feel by adding millions more recipients to their rolls, the health care law provides for CMS to pick up all the costs of the new Medicaid enrollees for the first three years and phase that share down to 90 percent in 2020.

Also at issue is what benefits different groups of Medicaid enrollees will get. Many states already use managed-care plans in their traditional Medicaid programs, and some officials had assumed that they could simply add the expansion population to those plans without any big changes. Some did not realize that they also have to make sure that those plans include the 10 essential benefit categories the health care overhaul (PL 111-148, PL 111-152) requires. State officials also must make sure that the benefits are at least equal to those in one of several plans that are already available in the state, so-called benchmark plans.

"That's where the disconnect comes in. States really did think if they had an accepted plan under Medicaid, which de facto has to be approved by CMS, that they could simply extend to the expansion population," said Kathleen Nolan, the National Association of Medicaid Directors director of state policy and programs. "We are beginning to hear questions."

The requirements for the expansion population "pulls from both of these other two buckets to create some new life form," said Nolan. "We don't know what it's going to look like right now."

The old-style Medicaid program has always allowed states to offer different kinds of optional benefits that are not required by the federal government. Because different states chose to offer different non-required benefits, each state's program is unique. That led to the adage, "If you've seen one Medicaid program, you've seen one Medicaid program." Under the new system, that might be updated to "If you've seen one Medicaid program, you've seen two Medicaid programs." Or more.

Sebelius Promises Flexibility

Health and Human Services Secretary Kathleen Sebelius said in a Jan. 14 letter that states also "may select different plans for different groups of individuals" within the expansion population.

One difference between the benefits for the expansion and traditional groups is that the newly eligible are not entitled to nursing home care and other institutional long-term care. States can choose a variety of ways to offer long-term care services, or they could decide not to cover long term care at all. But that doesn't necessarily mean that the newly eligible would never be able to get government-covered nursing home care; they could spend down their resources and become eligible for Medicaid through the traditional program.

Many experts—such as Alan Weil, the executive director of the National Academy for State Health Policy—say that because the benefits for the newly eligible may be less generous than what's available under the traditional Medicaid program, a two-tier Medicaid system might result. "The alternative package is not as comprehensive as the traditional Medicaid package," he said.

But others said that given that states have not made decisions on the types of benefit that will be available, it's too early to conclude that the newly eligible population will get skimpier benefits than those in the regular Medicaid program, or in which states the benefits between the groups might differ dramatically.

Officials from the state Medicaid directors' group said that commercial plans in some states might offer benefits that aren't required to be covered under the old Medicaid program, something that states now do voluntarily. Those include acupuncture or chiropractic services.

Under other circumstances, the coverage for the newly eligible has to be similar to what's offered in Medicaid but that is not typically part of commercial coverage. For instance, the expansion group will be entitled to transportation services, family planning services, and care provided by rural health clinics and federally qualified health centers, something traditional health insurance policies do not cover.

Some people are exempt from the requirements for the newly eligible and will have to be offered the full traditional Medicaid package. Those include people with disabilities, people enrolled in both Medicaid and Medicare, and the medically frail.

States are waiting for the release of a final rule providing more details on Medicaid under the health care law. A proposed rule was released in January. Once a final rule is issued, the discussions in states around the country will become more urgent and specific.

One thing is clear: The new law will not make Medicaid benefits more uniform.

"There really could be substantial variations not just between Medicaid beneficiaries in a given state, but also between the states in terms of what they're offering," said Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured.

By Jane Norman, CQ HealthBeat Associate Editor

April 19, 2013 -- The Obama administration is telling states that will have federal marketplaces or state–federal partnerships that they can apply for federal exchange establishment grants to pay for statewide marketing campaigns.

According to a Centers for Medicare and Medicaid Services (CMS) newsletter, a "new funding opportunity" will allow those states to apply to tap the open-ended pot of money available through the exchange establishment grant fund. However, the statewide marketing campaigns must agree to use "federal messages" and language for their efforts, the newsletter said.

A spokeswoman for CMS confirmed that a set of fact sheets "will be posted soon" with details about how states will be able to apply for the marketing money. She said that "technically" the funding opportunity is not new because it builds on guidelines for exchange establishment grants laid out in June 2012.

This new offer from the administration might increase spending in federal and partnership states when it comes to promoting exchange enrollment, which is set to begin Oct. 1.

But it would also require some state Republican leaders who have been less than enthusiastic about the overhaul to ask the federal government for money to boost the law (PL 111-148, PL 111-152) to their state's consumers.

The CMS spokeswoman said she couldn't anticipate how many states might ask for marketing money. And in terms of how much each state might receive, the spokeswoman said that HHS will consider whether a state's proposed budget is "sufficient, reasonable and cost effective."

Anxiety has been rising among lawmakers and others about educating Americans on how to enroll in the new exchanges, with Senate Finance Chairman Max Baucus, D-Mont., this week predicting a "train wreck".

One problem is that the Department of Health and Human Services (HHS) has just $54 million in grant money for the navigator program to spread among 34 states that will have federal exchanges or state-federal partnerships. HHS is including Utah in that group, although Utah has continued to negotiate with the federal government over whether it can continue to run its small business exchange while the feds operate the marketplace for individual customers.

Health policy experts have said there could be significant differences in enrollment outreach between the federally run exchanges and state-run marketplaces. That's because the $54 million in navigator grants for the federal states had to be eked out of congressional appropriations. State-based exchanges, in contrast, can receive much larger grants out of the much larger exchange establishment fund for a new category of government-paid helpers HHS created called "in-person assisters."

Now, HHS apparently is willing to let that exchange establishment money flow to rest of the states for their marketing efforts. So far, $3.6 billion in establishment grants has been awarded to states, according to the Kaiser Family Foundation. States can continue asking for establishment grants through 2014.

The state marketing campaigns will have to be in line with the federal marketing message. One document on a website set up by CMS about marketing explains how states should talk to the public about this new program that isn't going to be available until this fall.
Among the "top messages" are that people may be eligible for a "new kind of tax credit that lowers your monthly premiums right away" and that consumers may "pay less for health insurance right away."

And on language "dos and don'ts," apparently based on research, CMS urges that communications refer to "the health insurance marketplace" rather than "exchange" because "people think 'exchange' is a place to trade or swap merchandise and don't immediately associate it with health care."

Another phrase to "use cautiously," says CMS, is one that says that families earning up to $92,000 a year can get help, which refers to the upper limit for a family to receive a tax credit. "The $92K figure is too high for low-income consumers to relate to as a motivational message," says the document.

Meanwhile, the publication PR Week reported that both CMS and the state of Maryland hired the public relations firm Weber Shandwick to run campaigns promoting the exchanges and "combined, the contracts are worth nearly $14 million."

A spokeswoman for the Maryland exchange, which is state-run, said the Maryland contract with the company is for $5.975 million, and it covers the period from Jan. 13, 2013, until Dec. 31, 2014.

She also said that the Maryland Health Connection—the name of the state's exchange—anticipates that $24.8 million will be available to the state in 2013 to pay for navigators and in-person assisters who will help people enroll in the exchange, with the funds coming from appropriations from state lawmakers and from federal grants.

By Emily Ethridge, CQ Roll Call

April 19, 2013 -- The House is expected next week to consider a bill opposed by some conservative groups to extend enrollment in the health care law's high-risk pools for people with pre-existing conditions through the rest of the year.

The House Rules Committee will meet April 23 to adopt a rule for consideration of the bill (HR 1549), which is backed by the GOP leadership. Two conservative groups, the Club for Growth and Heritage Action, oppose the measure, but a third, FreedomWorks, is urging GOP lawmakers to support the bill.

Under typical rules, the bill would need only a simple majority to pass the House, which means it could succeed even if some Republicans voted against it.

The measure, sponsored by Joe Pitts, R-Pa., would provide funding to extend enrollment in the health care law's (PL 111-148, PL 111-152) high-risk pools for people with pre-existing conditions through the rest of the year. Republicans criticized the Obama administration's decision earlier this year to suspend enrollment in the pools, which had lower enrollment and higher costs than expected.

According to the Congressional Budget Office (CBO), the bill would reduce direct spending by $840 million between 2013 and 2023.

The bill would take about $3.7 billion from the law's Prevention and Public Health Fund to allow for extended enrollment in the high-risk pools, the CBO found.

Dean Clancy, FreedomWorks' vice president for public policy, noted in a statement that the bill would help impede the law's implementation by transferring money from the prevention fund. He said it also would give Republicans a chance to talk about high-risk pools, a staple of most GOP health overhaul plans.

Before the other groups announced their opposition, Republicans had rallied behind the measure, approving it on a party-line, 27-20 vote in the House Energy and Commerce Committee.

The groups that oppose the bill said Republicans should not try to fix parts of the law or expand the federal government's presence in the health insurance market.

"Fiscal conservatives should be squarely focused on repealing ObamaCare, not strengthening it by supporting the parts that are politically attractive," the Club for Growth said in a statement last week.

Majority Leader Eric Cantor, R-Va., supports the bill and said it does not detract from Republicans' top goal of full repeal.

"House Republicans remain committed to full repeal of the health care law and advancing legislation that will actually achieve those goals," he said in a statement.

The bill also would eliminate a requirement that people be uninsured for six months before qualifying for coverage in the high-risk pools. Currently, about 110,000 people are enrolled in the pools.

By John Reichard, CQ HealthBeat Editor

April 19, 2013 -- The new Simpson-Bowles plan released late last week is likely to get serious scrutiny in health policy circles because it's so specific. Also, it affirms approaches popping up in other deficit-reduction proposals.

The proposal is strong stuff to be sure, if lawmakers decide someday that deficit spending represents a true crisis, its remedies may not be out of the question.

And even if the plan or something like it never becomes law, elements of it could be picked off to offset the cost of other legislation, such as a fix for the Medicare physician payment formula.

In order to help shrink deficit spending by $2.4 trillion from fiscal 2014 to 2023, the plan would make $585 billion in health care cuts, primarily from Medicare and Medicaid. It would reduce non-defense discretionary spending by $165 billion, putting the National Institutes of Health, the Centers for Disease Control and Prevention, and the Food and Drug Administration (FDA) on the chopping block.

But that's dramatically less than the discretionary spending cuts those agencies now face under the sequester provisions of the budget control law (PL 112-25). The plan would replace "abrupt across-the-board cuts by restoring 70 percent of the sequestration cuts in 2013 and limiting the defense and non-defense spending growth to inflation through 2025," says a summary of the plan.

The plan tilts toward spending cuts, with those reductions accounting for 70 percent of its reduced deficit spending and revenue increases accounting for 30 percent.

Perhaps the most radical aspect of Simpson-Bowles occurs long term. Starting in 2018 it would limit per-capita spending growth among enrollees in federal health programs to the increase in the gross domestic product.

Here's a rundown of how the plan would cut the $585 billion:

• Delivery system and payment changes ($60 billion): Health care law (PL 111-148, PL 111-152) provisions would be expanded that reduce Medicare payments in cases of preventable hospital readmissions. Many experts "believe much more can be done to discourage avoidable readmissions by expanding the program to include more medical conditions and higher penalties on more types of providers," the plan says. But penalties should be calibrated "to adjust for patient demographics, types of conditions, and timing of readmission."

The plan also urges "a system in which many providers are paid a fixed amount for a bundle of services for all of a patient's care." To accomplish that, it would expand the "Medicare Acute Care Episode" demonstration program, a test of bundled payment started in 2009 under authority granted in a 2008 Medicare law (PL 108-173). It would expand competitive bidding beyond the current program for durable medical equipment to also establish bidding programs for medical devices, laboratory tests, radiologic diagnostic services "and various other commodities."

An alternative Medicare benefit package would be developed to encourage coordinated care. "For example, a new plan option could merge Medicare Part A, B, and D into a single benefit package, provide care coordination services, and offer lower cost sharing to beneficiaries who use high-value providers and services," the plan says.

The Centers for Medicare and Medicaid Services (CMS) should study ways to make beneficiaries more price conscious. "In the meanwhile, we recommend prohibiting 'gag clauses,' which prevent insurers from releasing price information to the consumer," the plan states. CMS also should mandate "public reporting of prices for a basket of routine elective procedures." The plan also takes steps to limit supplemental coverage that covers out-of-pocket costs. That would give beneficiaries an incentive to shop for the best price, helping to trim Medicare outlays, the plan says.

The plan also suggests the possibility of basing payments to Medicare Advantage plans on bids filed by insurers to offer a package of benefits. CMS should have power to aggressively implement and expand pilot programs that test different forms of health care delivery. And the Independent Payment Advisory Board "should not be restricted through special interest carve-outs, and policymakers should consider giving it expanded authority to change benefit design and reform cost-sharing rules."

• Change Medicare cost sharing ($90 billion): The plan proposes "a new simple regime that calls for more 'skin in the game' for first-dollar coverage, offers better protections against catastrophic costs, provides important low-income protections, and discourages the use of costly supplemental plans." Originally Simpson-Bowles called for a single unified deductible of $550 for Medicare Part A and Part B, co-insurance charges of 20 percent on covered services up to a ceiling of $5,500 in out-of-pocket costs, and a smaller co-insurance rate of 5 percent on costs up to $7,500. The new proposal would make some adjustments to vary the deductible and other out-of-pocket charges based on income.

Also, "we would restrict Medigap plans so that they are no longer able to provide first-dollar coverage within the Medicare deductible and can cover no more than half of the base Medicare co-insurance."

• Change the medical malpractice system ($20 billion): Rather than cap damage awards, the proposal would establish a statute of limitations for malpractice claims; make defendants liable for only their share of the responsibility for injury; place sliding-scale limits on lawyer contingency fees; create a provider safe harbor for certain FDA-approved products; and apply a health court model in some instances, among other changes.
• Increase income-relating of Medicare premiums ($65 billion): In the case of Part B and Part D, "we recommend increasing existing income related premiums by 15 percent so that the 35 percent premium increases to 40.25 percent, the 50 percent premium to 57.5 percent, and so on." In other words the wealthy would pay an increasing share of those program costs through premiums that grow more than they do now with income. In addition, income relating of premiums would begin at a lower income threshold such that close to 15 percent of the senior population would be subject to the practice.
• Increase the Medicare age ($35 billion): Similar to a proposal by the Urban Institute, the plan would increase the Medicare eligibility age by one month per year beginning in 2017 until it reaches age 66, and then by two months per year until it reaches the normal Social Security retirement age. At that rate the Medicare age would reach 67 by the mid-2030s. In addition, people at age 65 not yet eligible for the program could buy into Medicare with premium charges varying based on income. This approach would reduce federal spending "while encouraging work, increasing economic growth, and having only a modest effect on national health spending."

Other elements of the plan would cut $70 billion in payments to skilled nursing facilities, home health, inpatient rehab, and long-term care hospital providers; reduce graduate medical education payments; and reduce enhanced payments for rural providers. A total of $65 billion in Medicare payments to hospitals would be trimmed by phasing out "bad debt" payments to compensate facilities when patients don't pay out-of-pocket costs.

In addition, $90 billion would be saved by restoring Medicaid rebates for drugs for dually eligible beneficiaries who qualify for both Medicare and Medicaid coverage. Another $25 billion in savings would come from cracking down on fraud, requiring prior authorization for advanced medical imaging, trimming some bonus payments to Medicare Advantage plans, trimming clinical lab payments, and equalizing payments for evaluating and managing patients so the rates are the same in doctors' offices and in hospital outpatient departments. And a total of $65 billion would be saved by limiting state tactics to increase federal Medicaid matching payments such as taxes on providers.

By CQ Staff

April 18, 2013 -- The Arkansas state senate approved a plan last week to use the health care law exchanges to cover Medicaid beneficiaries, paving the way for an expected quick signature from Gov. Mike Beebe, a Democrat who has backed the approach.

The chamber voted 28-7 for the plan, which required 75 percent—27 votes—to pass. The Arkansas House approved the bill by a 77-23 vote.

Once Beebe signs the measure, the next hurtle state lawmakers would have to overcome is getting federal Centers for Medicare and Medicaid Services (CMS) officials to go along. Arkansas wants CMS to allow it to use money from the health care overhaul's Medicaid expansion to provide coverage to Medicaid beneficiaries through private plans that will be selling coverage in the new marketplaces established under the health law. Enrollment is scheduled to begin on Oct. 1.

States with officials who oppose the health care law (PL 111-148, PL 111-152) are watching the Arkansas developments and have suggested they may emulate it. This option would allow them to accept billions of federal dollars provided under the overhaul without appearing to support expanding a government program. CMS officials have said they are anxious to see proposals. Agency officials this week declined to provide any documents from Arkansas.

By John Reichard, CQ HealthBeat Editor

April 18, 2013 -- The Bipartisan Policy Center recently released recommendations it said would save $560 billion in health spending over the next decade while also reengineering medical care to emphasize a team-based treatment.

The architects of the plan said it offered a road map to bipartisan action in Congress.

Although the plan aims to overhaul health care widely, Medicare changes were prominent among its recommendations. Medicare is a large enough payer to drive change throughout the health care system, the authors of the plan said. The Medicare revisions would account for $300 billion in savings while expanding taxation of health insurance to discourage employers from offering high-cost plans would save $260 billion.

Bipartisan Policy Center President Jason Grumet said the recommendations were prepared by a "dream team" of budget analysts who created "a new policy space for Congress to explore."

Among those who prepared the plan were Republican Pete Domenici, former senator from New Mexico, and Alice Rivlin, a Democrat who was the first director of the Congressional Budget Office. Also involved were an all-star cast of budget and health aides: Bill Hoagland, longtime GOP staffer on the Senate Budget Committee and an assistant to Tennessee Republican Bill Frist when he served as Senate Majority Leader; Sheila Burke, who served as chief of staff to GOP Senator Robert Dole of Kansas; and Chris Jennings, the senior health aide in the Clinton White House. MIT economist Jonathan Gruber worked on the tax provisions.

Former Senate Majority Leader Tom Daschle, who served as a Democratic senator from South Dakota, said a key element of the plan is moving away from fee-for-service based payment which leads to unnecessary services. The aim it to have health care "coordinated through organized systems rather than volume-driven and fragmented."

"We focus on improving the entire system of care," the report says in explaining why the proposal is different. "We have also brought bipartisanship to the table, dedicating nearly a year to reasoned negotiations to break through the partisan rhetoric," it added. "We sought policy options around which both sides of the political aisle could realistically coalesce."

Rivlin explained during a news briefing that the plan would add "Medicare Networks" as a third option to the Medicare alongside the fee-for-service program and Medicare Advantage. Rivlin said the networks would be "ACOs on steroids," referring to the some 300 accountable care organizations in Medicare that contract to meet quality and savings targets that trigger bonus payments if met.

ACOs currently do not permit beneficiaries to share in any savings they generate but the new proposal would change that. Beneficiaries enrolling in a Medicare Network would pay lower premiums. "They and their providers also could share in savings that result from greater quality and efficiency," the report says.

For the most part, doctors, hospitals, and other providers now participating in Medicare ACOs receive bonuses if they meet savings targets but they are not penalized for missing them. Under the proposal, that too would change. The report calls for financial disincentives to stay in the less efficient fee-for-service system. Medicare Advantage also would be changed so that payments were no longer pegged to levels of spending in the traditional Medicare fee-for-service program. Instead, plans would file bids on what they would charge to offer a standard package of benefits and payments would be set based on those bids. But competitive bidding among plans would only occur in parts of the United States where that system would generate savings.

Medicare fee for service would change too through a greater commitment to competitive bidding to determine reimbursement levels for products and services and through bundling payments so that efficient providers who worked together could share in any savings generated by their cooperation.

Medicare benefits would be revamped. There would be a single deductible, first dollar coverage by Medigap policies would be prohibited in an effort to discourage the unnecessary use of services, and there would be a cap on yearly out-of-pocket spending for covered services. Visits to the doctor would not be subject to the deductible.

On the tax side, the proposal would replace the health care law's current "Cadillac tax" on high-cost health plans that starts in 2018. Instead, it would establish a tax in 2015 on that portion of premiums above the 80th percentile for single and family employer-sponsored health insurance.

The center's 142-page plan also would address medical liability and loosen scope of practice rules to expand those who could provide primary care, among other changes.