By John Reichard, CQ HealthBeat Editor

February 14, 2013 -- The top federal official in charge of establishing health insurance marketplaces under the health care law recently detailed plans for a poorly understood but major part of that effort: the federally facilitated exchange.

It was long past time to do so, Sen. Orrin G. Hatch, R-Utah, indicated in his opening remarks at a Senate Finance Committee hearing on exchanges. "Many key details remain unanswered," Hatch complained in his opening statement at the hearing, which centered on testimony by Gary Cohen, head of the Centers for Consumer Information and Insurance Oversight at the Centers for Medicare and Medicaid Services (CMS).

These new marketplaces will enroll individuals and small businesses in insurance plans.

So far, the administration has only offered 19 pages of guidance, Hatch said. "Those 19 pages amount to little more than a statement of purpose from the administration and exactly what the states can expect remains largely unknown."

After Democrats aggressively peppered Cohen with questions about various aspects of the implementation of insurance options under the overhaul, he walked the committee through a number of details relating to the setting up of exchanges, many of them relating to the federal exchange. CMS is now calling the exchanges "marketplaces."

Cohen noted that the Web portal where people will go to sign up for coverage on the federal exchange will be at HealthCare.gov. He said next month CMS would begin to get input on the federal exchange from consumers, providers and other stakeholders in each of the states in which it is expected to operate, which will be in those states that have not signed up for either their own exchange or a partnership model with the federal government. That's more than half of the states in the nation, Hatch reminded the audience. That input will give the agency a chance to address concerns about the federal marketplace in places most hostile to the health care law (PL 111-148, PL 111-152).

Cohen also went through other nitty-gritty aspects of the huge amount of work involved in getting the exchanges going.

On Jan. 28, CMS released a draft model application that individuals and small businesses will use to apply for health care coverage on the exchanges. The applications will be available in the spring after comments are gathered and final testing is conducted. The forms can also be used by states setting up their own exchanges and by their Medicaid and Children's Health Insurance Program (CHIP) agencies.

"This means that most individuals can use the same application, and provide information only once, no matter how the individual submits the application and regardless of which program receives the applications," Cohen said.

Nuts-and-Bolts Work Under Way

Cohen said testing has begun on a "federal data services hub" that will be linked to all exchanges. It will connect with the Department of Homeland Security, the Social Security Administration, and the IRS to verify citizenship and to determine any tax credits available to help buy coverage. Each of the agencies has signed agreements with the CMS to provide the needed data "in real time" starting in October, Cohen said. Testing of the movement of data among the agencies linked to the hub will be completed this spring, Cohen said.

He noted that it would be a pathway for information but would not store it. "We have completed the hub's technical design and have almost completed the services related to federal and state agency interactions,'' Cohen said. "We have completed a framework for security across agencies."

Tests will then be made with "states that are the furthest along with implementing their marketplaces," and CMS "will continue testing throughout the year. The hub will begin officially supporting the verification of applicant information on Oct. 1, when open enrollment begins.

"The hub will access only the information needed to determine individual eligibility and will not be involved in the selection or certification of health plans," Cohen added.

After consumers are verified by the hub as being eligible to shop on exchanges, they will be able to begin the process of searching for a plan. "We are well along in the process of making sure that [they] will find a variety of affordable, comprehensive, qualified health plans to choose from," Cohen said. "CMS is building a plan management infrastructure that will enable us to see, review and approve applications from issuers for plans to be sold in the federal marketplace."

CMS released a draft template last November that insurers will use to submit information on plans they intend to offer for sale. "Issuers will begin submitting applications to us at the end of March," Cohen said. "We will review those applications and will approve plans to be sold in the federal marketplace by the summer. Issuers will then have an opportunity to review and make any corrections in the information about the plan that will appear on the web site at the beginning of October."

Cohen said CMS will know by July what premiums plans will charge shoppers on the federal exchange.

The process of qualifying for and signing up for coverage will take as little as 30 minutes in some instances, Cohen said. But many people will need lots of personal help to navigate the process.

"Navigators," people and organizations that provide assistance, will play a "crucial" role in helping consumers use exchanges, Cohen said.

Consumer Help in Pipeline

"Our first funding opportunity for navigators will be going out shortly," he added. CMS will issue the first grants for the navigator program in June "and training for the navigator program is under development."

Cohen added that "we will soon be releasing additional guidance on the navigator program and other assistance programs that consumers will be able to access when shopping for coverage in the new marketplaces." Cohen said, "These programs will also provide help for Medicaid-eligible consumers by walking them through the Medicaid or CHIP enrollment process."

Also, "CMS will provide agents and brokers with a portal to the federal marketplace website, HealthCare.gov, if the agents and brokers meet the applicable standards required to assist consumers," Cohen said. Agents and brokers can use the portal to help consumers apply for federal subsidies and enroll in a plan.

CMS is creating a "consumer outreach and education plan rooted in consumer research, audience segmentation analysis and state government's knowledge about the best ways to reach their residents," Cohen said in his written testimony. "We are challenging the states that are running their own marketplaces and those that are working with the federal government to reach out to communities and consumers in innovative ways.

"A media campaign will be launched soon just to increase awareness of the law and what the benefits are and what it can do for them," he told the senators. "When I say media, I mean all forms of media, social media, traditional media. The purpose of that will be trying to drive people to HealthCare.gov, which really is the central source of information about the Affordable Care Act and the marketplaces in particular and will give people the information they will need to then come back in October when they can actually take action to get enrolled."

CMS is enlisting other federal agencies to help reach and assist potential enrollees. It has an inter-agency working group to develop plans to encourage enrollment and distribute information. To that end, "CMS is also working with private partners, including nonprofits, provider and trade associations, advocacy groups, corporations and businesses, and faith- and school-based groups."

Cohen's testimony, while detailed, did not acknowledge any real problems in the implementation effort or express doubt that it would occur on time.

Senators wondered whether the situation might be more worrisome.

Committee Chairman Max Baucus, D-Mont., asked whether CMS would keep information about implementation problems under wraps. Cohen said no. The chairman also wondered whether there had been any "uh-oh revelations so far." Cohen said no. Baucus was skeptical, noting a problem with "antiquated" computer systems at agencies in involved in the hub. Cohen replied that that's why federal officials are creating the hub.

Cohen was unable to answer how many navigators would be hired and trained to assist consumers. But Cohen said the goal is to have help available for all who need it.

Sen. Johnny Isakson, R-Ga., warned: "You better get it right the first time. If it crashes and burns on Oct. 1, you have a huge problem."

By Rebecca Adams, CQ HealthBeat Associate Editor

February 15, 2013 -- Federal officials announced last week that they are blocking new patients from enrolling in the high-risk pools for people with medical conditions, citing cost concerns.

The suspension will take effect immediately in 23 states and District of Columbia, where the federal government runs the program, known as the Pre-Existing Condition Insurance Plan (PCIP). "All applications must be received by February 15 to be eligible for enrollment," said a two-page memo from the Center for Consumer Information and Insurance Oversight.

In other places, where individual states administer the programs, officials can decide to stop enrolling people immediately if they choose. Federal officials said that no applications from those states could be processed after March 2.

More than 135,000 enrolled in the plans after the program began in the summer of 2010—slightly more than one-third of the 375,000 people that early projections predicted. One reason why enrollment was lower than anticipated is that the federally authorized program requires people to be without insurance for six months. However, despite the relatively low enrollment, costs for the overall program were high because many of the patients had higher-than-anticipated medical bills.

The announcement came a day after the Center for Consumer Information and Insurance Oversight Director Gary Cohen told the Senate Finance Committee that the agency took other steps in January to keep the costs below the $5 billion that Congress provided. "We are doing everything we can to avoid running out of money," Cohen said.

In January, the federally run plans made several cost-saving changes. The memo asked administrators of the state-run programs to "determine the feasibility of changing your currently offered PCIP benefits to be consistent with" the lower federal benefits that were instituted in January.

The reductions in January included cutting the share of the medical bill that the plan pays after a patient pays a deductible. Starting in January, the federal program has paid 70 percent of charges and the patient must pick up 30 percent of costs after paying a $2,000 deductible. Previously, federal officials paid 80 percent of allowed charges with a 30 percent coinsurance for patients.

Federal officials also increased the maximum out-of-pocket limit from $4,000 to $6,250 in 2013 for in-network services and from $7,000 to $10,000 for out-of-network services. The program also consolidated three plan benefit options into one plan with a $2,000 deductible for in-network medical services and $500 deductible for formulary prescription drugs.

"CMS recognizes that several state-based PCIP programs currently offer coverage that may be more generous than the coverage now offered in the federal PCIP," said the memo. "State-based PCIPs may pay higher percentages of allowed charges, have lower deductibles, and lower maximum out-of-pocket limits than the federal PCIP. While CMS has allowed those variations in the past, CMS is evaluating the level of cost savings to be realized if state-based PCIPs were to adjust their benefit packages to match the benefits now offered in the federal" program.

People with preexisting conditions will be able to apply for health coverage through the new exchange marketplaces on Oct. 1.

"This program has successfully served more than 135,000 Americans and provided needed security to some of our nation's sickest people," said CMS spokesman Brian Cook. "We are suspending any new enrollment until further notice to ensure funding through the year for current enrollees, who will continue to receive the coverage they're depending on."

About nine million people in the United States have preexisting conditions that might qualify them for the high-risk pool program if they could meet other requirements.

• Memo
• PCIP Annual report

By John Reichard, CQ HealthBeat Editor

February 11, 2013 -- Hospitals continue to show progress toward reducing certain types of infections that patients contract in their facilities, the Centers for Disease Control and Prevention (CDC) reported last week.

The findings show that in 2011, the most recent year for which such data are available, the number of infections associated with the "central line"—a tube placed in the vein or chest of a hospital patient to deliver important medicines—fell by 41 percent compared to 2008 baseline figures. "Progress in preventing these infections was seen in intensive care units, wards and neonatal ICUs in all reporting facilities," CDC said in a news release.

The figures were based on data from CDC's National Healthcare Safety Network, which tracks infections in some 11,500 health care facilities in the United States and Puerto Rico.

In 2008, the Department of Health and Human Services set the goal of reducing central-line infections by 50 percent by December 2013. In 2010, the number was down by 32 percent compared to 2008. So the 41 percent figure for 2011 shows hospitals inching closer to the 50 percent standard as compared to 2010.

CDC also reported a drop in 2011 of 17 percent since 2008 in certain surgical-site infections. In 2010, hospitals had only achieved a drop of 7 percent, so these figures, too, showed progress. The HHS goal for reducing surgical-site infections by December 2013 is 25 percent compared to 2008 figures.

However, "this improvement was not evident for all procedure types, and there is still substantial opportunity for improvement across a range of operative procedures," said the news release.

Overall, "the significant decrease in central-line and surgical-site infections means that thousands of patients avoid prolonged hospitalizations and the risk of dying in the hospital," said Patrick Conway, chief medical officer of the Centers for Medicare and Medicaid Services (CMS). "Providers, working with CDC and CMS, are fulfilling Medicare's quality measurement reporting requirements for hospital infections and demonstrating that, together, we can dramatically improve the safety and quality of care of patients."

Hospitals did not improve in 2011 when it came to urinary tract infections associated with catheters, however. These infections are a worry because patients who get them are more likely to need antibiotics. "While antibiotics are critical for treating bacterial infections, they can also put patients at risk for other complications, including a deadly diarrhea," CDC said.

By Emily Ethridge, CQ Roll Call

February 14, 2013 -- House Energy and Commerce members began discussing different elements of a plan to replace how Medicare pays doctors, but some disagreements may be difficult to overcome.

Lawmakers from both parties praised the proposed schedule offered by Chairman Fred Upton, R-Mich., to bring a replacement measure to the House floor by the August recess.

Joe Pitts, chairman of the Health Subcommittee, said there is broad agreement to repeal the current payment formula, the sustainable growth rate (SGR), as well as on some details.

"In thinking about the proper payment policy, there seems to be fairly widespread agreement that certain elements are needed to build that system," said Pitts, R-Pa., at a recent subcommittee hearing.

For example, physicians and payers need to be able to access reliable health data, and there should be appropriate measures to help assess progress, he said.

Still, some division remains over what kinds of payment models should replace the current formula. Democrats largely supported expanding on models that already are being tested or used in Medicare, including accountable care organizations (ACOs) and patient-centered medical homes.

Several Republicans expressed skepticism with the accountable care model, in which doctors, hospitals, and other providers voluntarily coordinate care. Medicare reimburses the entire organization for its services, and participants get to share in any savings if they provide care for lower cost while still meeting quality benchmarks.

Glenn Hackbarth, chairman of the Medicare Payment Advisory Commission, said that ACOs are designed to be flexible, but Republicans wondered whether they would work for all types of providers. Bill Cassidy, R-La., noted that under a current Medicare shared-savings program, ACOs must care for at least 5,000 beneficiaries.

Virginia Republican Morgan Griffith questioned whether the ACO model would work in rural districts like his, where patients and providers are spread out.

"I wouldn't completely write off the possibility that the ACO model can be used in rural areas," Hackbarth said, noting that 20 percent of accountable care organizations currently involve community health centers, rural health clinics, and critical access hospitals.

He acknowledged, however, that whatever payment models come into play may not fit every physician, and that some providers may need to be treated as special cases.

Michael C. Burgess, R-Texas, also expressed concern that ACOs would lead to more consolidation of medical practices by hospitals.
Cassidy noted that he is working on a proposal that would allow physicians in small practices to participate in working relationships in which they share savings, but also maintain independence.

Lawmakers also hinted at disagreement on how to pay for the cost of replacing the payment formula. The Congressional Budget Office has lowered the cost of repealing the formula to $138 billion over 10 years—down from a $245 billion estimate last year.

"In effect, SGR repeal is now on sale. But the sale may not last forever," Hackbarth said.

The new, lower cost represents a good opportunity, lawmakers agreed, but they will still need to find a way to offset that cost.

Subcommittee ranking Democrat Frank Pallone Jr. suggested finding some savings from within the health care sector, but said the committee also should consider using savings from winding down the wars in Iraq and Afghanistan—something Republicans have opposed in the past. The New Jersey Democrat also suggested doing a budget baseline adjustment to assume the cost of repealing and replacing the formula.

"SGR repeal is too expensive to pay for with Medicare cuts alone—especially when Medicare cuts are being considered to reduce the nation's debt," Pallone said.

Lawmakers diverged on a replacement proposal circulated by Republicans on the Energy and Commerce and Ways and Means Committees.

Pallone said if there is a commitment to write a bipartisan legislative proposal, then the decision to put out an all-Republican framework "is somewhat perplexing." He asked that any future products include the input of Democrats on the committee.

"As we move closer to the goal, I am confident that we can indeed make it a bipartisan effort," Upton said.

By Rebecca Adams, CQ HealthBeat Associate Editor

February 11, 2013 -- As Office of Management and Budget (OMB) reviewers do the final check on three significant health rules, lobbyists are anxiously waiting to see whether these regulations will emerge changed, particularly a proposal that outlines the essential health benefits that plans must offer in 2014.

Any revisions to the essential health benefit requirements, which were proposed on Nov. 26, 2012, could make a significant difference in the breadth of coverage and affordability of insurance for consumers. The OMB interagency review is the last stop before a regulation is issued.

OMB officials also are vetting a final rule, proposed Dec. 7, that details how plans' payments would be adjusted to reflect the health of patients, meaning health plans that enroll healthier beneficiaries would have to transfer money to plans with higher-risk enrollees. About $45 billion could be transferred between insurers from 2014 through 2017. That rule also spells out requirements for three-year transition programs governing reinsurance and risk corridors designed to limit plans' financial losses or gains.

The Centers for Medicare and Medicaid Services (CMS) sent both rules to OMB officials last week.

The administration is also preparing to release the rate review rule, which was published on Nov. 26. That rule implements provisions in the health care law (PL 111-148, PL 111-152) that require patients to be offered insurance without regard to pre-existing conditions and that sets limits on how much insurance costs can vary for different individuals. CMS officials had asked for comments on strategies that federal or state officials might deploy to avoid or minimize high premium price spikes. CMS officials sent that rule to OMB on Jan. 31.

Opinions Differ on What Is Essential

People wrote in with about 3,500 comments about the essential health benefits rule—so many that a CMS spokeswoman was unable to say exactly how many responses were filed. Some groups say the proposed benefits are too generous and will be difficult for employers or consumers to afford. Employers are calling on the administration to scale back requirements for prescription drugs, pediatric dental, and vision services, among others.

Others, including consumer groups and hospital associations, say too much emphasis is being placed on providing flexibility and affordability instead of ensuring that coverage is robust.

The public asked CMS for a wide range of changes to the rule. Advocates for coverage for acupuncture, lactation services and care for specific diseases, such as autism, made individual pleas as part of letter-writing campaigns. Others, such as the American Academy of Actuaries, asked CMS officials to be more clear in explaining how state-mandated benefits requirements will be implemented. The actuaries also want to know how the cost sharing will work when covering services that typically aren't offered in plans that states chose as their benchmarks, such as pediatric dental and vision care.

Even members of Congress commented. Rep. Bill Pascrell Jr., D-N.J., urged CMS to "ensure that state-selected Essential Health Benefit Benchmark Plans address the needs of brain injury patients through comprehensive coverage and offer strong protections against discriminatory plan designs." Pascrell recommended that the administration incorporate changes requested from the Brain Injury Association of America. The congressman is the co-chairman of the Congressional Traumatic Brain Injury Task Force.

One major flashpoint is the coverage of drugs. The proposed rule requires that plans cover at least one drug in every category and class, or the same number of drugs in each category and class as the state's benchmark plan, whichever is more. That raises the possibility that more than one drug in every class will be covered and potentially that many more drugs will be paid for.

A number of patients' groups urged CMS to expand coverage so that more than one drug is always covered.

"Patients need access to a wide range of prescription drugs, as they do not respond to a specific number of drugs but rather to specific drugs that best meet their needs as prescribed by their physician," wrote representatives of the American Lung Association.

Several groups, including the National Alliance on Mental Illness and AIDS advocacy groups, proposed adopting a system that the Medicare Part D prescription drug program uses. That program has identified six classes of drugs for which federal officials say it is important for patients to be able to choose from a wide range of drug-based treatments.

Many groups also expressed concerns that insurers would limit coverage to only generics or particular treatments. A variety of patient groups asked that CMS spell out that insurers will have to cover combination therapies, in which two or more medications treat a single disease.

But a number of employer groups are pushing CMS in the opposite direction, that of reducing coverage. The Essential Health Benefits Coalition, which includes groups such as the National Association of Manufacturers, said the coverage in the proposed rule could drive up costs so much that individuals and small businesses may not be able to afford the insurance.

The public should find out soon what conclusions CMS officials have reached. Health and Human Services Secretary Kathleen Sebelius has said in the past that the final rule will be out before the end of February, a commitment that seems likely, given OMB's review, and was recently confirmed by a CMS spokeswoman.

By John Reichard, CQ HealthBeat Editor

February 12, 2013 -- New forms of payment and health care delivery have moved beyond the pilot stage and are now "becoming the face of American medicine," Health and Human Services (HHS) Secretary Kathleen Sebelius said in a recent speech to the American Medical Association (AMA).

Sebelius said the signs are multiplying that a fundamental restructuring of the health system is under way, adding that it is contributing to the recent slowdown in overall health spending growth.

Congressional Budget Office (CBO) Director Douglas Elmendorf made a similar point in his remarks to the Senate Budget Committee. Elmendorf said something appears to be causing the spending slowdown in addition to the dampening effect that the economic downturn has had on health care spending by consumers.

Sebelius cited various factors as evidence of structural changes in health care, including a doubling since 2008 of the number of doctor's offices with electronic health records, the formation of about 250 accountable care organizations to promote team-based care, about 500 hospitals using bundled payments to spur more coordinated care and a decline in the number of hospital readmissions of Medicare patients. As a result of federal policies that have lowered Medicare payments for certain readmitted patients, readmissions fell by 70,000 over the past year, she said.

Sebelius added that doctors are increasingly reluctant to induce childbirth as an elective procedure, which is reducing the need for costly neonatal intensive care.

Sebelius noted that the Obama administration is intent on heading off the March 1 automatic cuts under the sequester provisions of the budget control law (PL 112-240), which include 2 percent cuts in Medicare payments to doctors and other providers.

But, she said, avoiding the sequester is just a first step. Without stronger efforts to control health costs, the system will face severe payment reductions later on, Sebelius said. "We also have to put health care spending on a sustainable trajectory," she said, urging doctors to become leaders in finding better ways to control health care costs.

White House National Economic Council Director Gene Sperling recently signaled that President Barack Obama would propose significant cuts to Medicare in his upcoming fiscal 2014 budget proposal.

Sebelius said the Obama administration is committed to overhauling the Sustainable Growth Rate formula that Medicare uses to pay doctors. However, Sebelius punted when asked after her remarks whether the administration would propose new Medicare payment cuts to offset the $138 billion, 10-year cost of overhauling the SGR and replacing it with a 10-year freeze on payments.

She noted that the administration has included an SGR overhaul in budget proposals and that it has separately proposed Medicare cuts, but it hasn't "married" the two to link the cuts to an SGR overhaul.

Sebelius also noted that the administration has been testing alternative models to resolving medical malpractice disputes and will release some promising findings from the tests in coming weeks.

Senate Budget Committee Chairman Patty Murray, D-Wash., hailed a projected slowdown in Medicare spending growth at a hearing that had Elmendorf as its sole witness.

Noting CBO projections released last week, Murray said, "I stopped and underlined one statistic because I found it so surprising. The statistic is that CBO has lowered its estimate of federal spending for Medicare and Medicaid to such a degree that spending for 2020—one year—is now $200 billion lower than CBO thought back in 2010, an improvement of 15 percent.

"And let's be clear: That improvement has occurred since enactment of the Affordable Care Act."

Murray said she's hearing from former CBO Director Peter Orszag and from providers that "significant innovation is already under way."

Elmendorf said CBO's revisions have occurred because "there's been a marked slowdown in the rate of growth of health care spending across the health care system. We see this in private insurance costs. We see this in Medicaid. We see this in Medicare. And within Medicare, we see it" in Parts A, B and D of the program.

"So it's a very broad-based slowdown, under way now for several years. We are working intensively, as are many other people, to try to understand the sources of that slowdown. Our current assessment is that a part of that comes from the financial crisis and recession that reduced the income and wealth that people have to spend on health care. But we think that a significant part is more structural in nature and involves underlying changes in the way that health care is practiced and delivered. The challenge for us and others is to understand how much of those structural factors represent a transient phenomenon and how many represent a more enduring phenomenon. And we really don't know at this point."