By Rebecca Adams, CQ HealthBeat Associate Editor

January 14, 2013 -- Under a 474-page proposed rule released last week, state officials would be able to charge Medicaid patients higher cost-sharing for some services than current regulations allow.

The proposed rule also affects a wide range of other Medicaid provisions, including appeals of eligibility determinations; coordination between Medicaid and the new health care law's insurance exchanges; the role of counselors to assist people with their coverage applications; procedures to verify employer-sponsored coverage; and the use of updated Medicaid eligibility categories.

Centers for Medicare and Medicaid Services Deputy Administrator Cindy Mann recently said on a call with reporters that the new proposal would increase the amount that states could charge patients for non-preferred drugs, non-emergency care in emergency departments and some other services.

Mann said the new proposal is necessary because different federal laws govern Medicaid eligibility and there has been a lot of "overlap and underlap and confusion" about what states could ask of beneficiaries through cost-sharing.

Mann said CMS officials "put those authorities together and tried to make the most sense out of them" by spelling out what states can charge beneficiaries with income under 100 percent of the federal poverty level and what they can charge for people with income higher than that. Under the health care law (PL 111-148, PL 111-152), states can elect to expand Medicaid eligibility to people with incomes up to 138 percent of the federal poverty level.

States will be able to charge $8 copays for non-preferred drugs and $8 copays for non-emergency use of the emergency department for people with income equal to or less than 150 percent of the poverty level or who have been exempt from cost-sharing. Those copays are now typically lower than that.

"That allows states to really drive folks to preferred drugs, which is a big potential cost-saver for them," said Joan Alker, co-executive director at the Center for Children and Families and a senior researcher at the Georgetown University Health Policy Institute. Preferred drugs often are lower-cost medicines, such as generics.

For people with family income above 150 percent of the poverty line, cost-sharing for non-preferred drugs would not be able to exceed 20 percent of the cost that the agency pays for the medicine. CMS officials would keep current rules that don't have a limit on the cost-sharing that may be imposed for non-emergency use of the emergency department for those above that income limit.

In the past, CMS has allowed states to charge "nominal" copays, but Mann said the requirements have been complicated and "hard for people to understand."

For instance, cost-sharing for outpatient services is tied to what the agency pays for the service. In fiscal 2013, CMS officials allowed states to charge up to $1.30 for outpatient services if the agency pays more than $10 to $25. If the costs are higher, states could charge more. The maximum copay could be $3.90 for services that cost the agency more than $50.

If the rule is finalized as it has been proposed, CMS officials would allow flat copays of $4 for outpatient care.

But the agency is also considering adding a cap for inpatient care for beneficiaries with incomes below the poverty line. Current rules for institutional care allow states to charge patients up to half of the cost for the first day of care for individuals with incomes below 100 percent of the poverty line.

"This is a relatively high cost for very low-income people and not a service that consumers have the ability to avoid or prevent," said the rule, which added that CMS officials are seeking "comment on the best approach to cost-sharing for an inpatient stay for very low-income individuals."

The proposed rule also would allow states to offer benefit packages to the group of people who would gain eligibility in 2014 under the health care law that would differ from what is currently allowed for Medicaid patients under the traditional program.

"A lot of times you hear about states wanting to do more of a commercial package," said Alker. "This might be an important option for states that might be on the fence about whether to expand their programs."

Alker also expressed disappointment that the rules would allow state officials to continue using waiting periods for kids who are eligible for the Children's Health Insurance Program. The proposal would scale back the waiting periods so they could last no longer than 90 days, but Alker's group had hoped that CMS officials would eliminate them.

Other parts of the rule would aim to streamline appeals decisions so that people who are denied coverage don't have to file separate appeals with exchange officials and Medicaid officials. States that run their own exchanges could choose to have the exchange take the lead in deciding Medicaid appeals.

The public has until Feb. 13 to comment on the proposal.

By Jane Norman, CQ HealthBeat Associate Editor

January 15, 2013 -- Word that Arizona will participate in the health law expansion of Medicaid represents a change of heart for a Republican-led state that was one of the plaintiffs in the lawsuit that challenged the health care law all the way to the Supreme Court.

Arizona Gov. Jan Brewer announced in her State of the State address last week that in 2014, Arizona would extend Medicaid coverage to adults earning up to 138 percent of the federal poverty level, as is called for in the health care law (PL 111-148, PL 111-152). Under the Supreme Court's 2012 ruling, states are allowed to opt out of the expansion without losing all their Medicaid funding.

"Try as we might, the law was upheld by the U.S. Supreme Court," Brewer said in her address. "The president was re-elected, and his party controls the U.S. Senate.

In short, the Affordable Care Act isn't going anywhere—at least not for the time being."

Arizona joins two other nearby Republican governors, Brian Sandoval of Nevada and Susana Martinez of New Mexico, in deciding to expand Medicaid.

A statement on the governor's office web site said that expansion would cost Arizona $154 million in state funds in its first year of implementation but that over time, Arizona will also receive about $1.6 billion in new federal funding for Medicaid. The expansion will add 240,000 adults to the rolls in Arizona and continue covering 50,000 childless adults already enrolled, said Brewer's statement.

She said in her remarks that the expansion will protect rural and safety net hospitals from being pushed to the brink by their growing costs in caring for the uninsured; take advantage of the "enormous" economic benefits brought by the federal funds; and provide health care to thousands of low-income people.

"Saying 'no' to this plan would not save these federal dollars from being spent or direct them to deficit reduction," she said.

"No, Arizona's tax dollars would simply be passed to another state—generating jobs and providing health care for citizens in California, Colorado, Nevada, New Mexico or any other expansion state."

Brewer said that under a plan she devised, the Arizona expansion would automatically roll back its enrollment if the federal reimbursement rates decrease. "I won't allow ObamaCare to become a bait-and-switch," she said.

She also said she would also allow hospitals and health providers to assess a fee upon themselves and use the revenue to gain additional federal Medicaid reimbursements, a tactic already used in other states and one that's been eyed by congressional lawmakers as they seek to rein in the deficit.

The system essentially allows states to ramp up their federal funds to pay for nursing home care. States charge the assessments against providers, and as the assessments increase, so does matching money from the federal government.

Brewer said she is a "deficit hawk" but the federal money is needed. "With the realities facing us, taking advantage of this federal assistance is the strategic way to reduce Medicaid pressure on the State budget," she said.

By Melissa Attias, CQ Roll Call

January 14, 2013 -- Individuals who get health insurance because of the overhaul law could see coverage gaps and unnecessary costs as they transition to Medicare if state and federal officials don't make proper preparations, according to a recent report from the Medicare Rights Center.

The report emphasizes the importance of developing "a thoughtful and comprehensive plan" that provides consumers with seamless coverage as the transition occurs, and it lays out recommendations to accomplish that goal. The health care law (PL 111-148, PL 111-152) creates brand-new transitions to Medicare, beginning in 2014, as individuals who obtain coverage because of the overhaul become eligible for the program, the authors note.

"Measures will be needed to help ensure seamless transitions into Medicare," Joe Baker, president of the Medicare Rights Center and a primary author of the report, said in a news release. "By taking these steps now, state and federal governments can help ensure that people who become eligible for Medicare are protected from gaps in coverage and unnecessary out-of-pocket costs that could put their health and economic security at risk."

The report advises states and the federal government to focus on three groups of people: those who receive coverage under the law's Medicaid expansion who cannot continue that coverage once they're eligible for Medicare, but may be eligible for other government subsidies; those who get Medicaid coverage as a result of the expansion who may still be able to remain in Medicaid once they join Medicare; and those who have private insurance coverage through the health care law's exchanges, some of whom may be getting federal subsidies to help pay their premiums.

Under the 2010 overhaul, states can extend their Medicaid programs to individuals under age 65 with annual incomes up to 138 percent of the federal poverty line with an enhanced federal match.

The authors call on states and the federal government to examine how the eligibility requirements and enrollment systems for Medicare line up with the new procedures set up under the overhaul for those without Medicare coverage. The law establishes "a streamlined and mostly automated eligibility determination and enrollment process" for plans offered through the exchanges and Medicaid, they write, but those eligibility provisions do not apply to Medicare.

The report suggests building on provisions in the health care law and other programs in order to help provide seamless transitions to Medicare. It recommends lining up and simplifying financial eligibility requirements, as well as application and renewal rules, and using electronic data-sharing. It also proposes updating the eligibility and enrollment systems for the entire Medicaid program and using outreach and education to provide clear and timely information about benefits and the enrollment process.

"To ensure a smooth transition to Medicare, federal and state policymakers must examine the potential pitfalls, complications and disruptions involved in that transition and must implement the solutions recommended above or propose other solutions that will help these individuals, especially those with limited incomes, maintain seamless, comprehensive and affordable coverage," the report says.

By Jane Norman, CQ HealthBeat Associate Editor

January 16, 2013 --The Department of Health and Human Services (HHS) recently rolled out new features on its main website publicizing the health care law, characterizing it as a portal for people to use when looking for information on enrolling in health insurance exchanges.

Notably, though, the site largely avoids using the word exchange, which is the term used throughout the health care law (PL 111-148, PL 111-152). Some experts have speculated that references to an exchange can be confusing to people who don't understand what an exchange is supposed to mean.

Instead the site uses the label "Health Insurance Marketplace," replacing the earlier "Affordable Insurance Exchanges." An HHS aide speaking on background confirmed the switch, saying that the exchanges often have been described in the past as one-stop marketplaces for insurance and that it seemed that "simpler was better."

The aide also said the biggest change to the site is the new focus on getting people the information they need for open enrollment beginning in October. Consumers, for example, will be able to sign up for texts and emails about new insurance options and benefits.

The revamped site comes as part of a stepped-up campaign by the agency to make sure that uninsured Americans understand that they have new choices coming for health insurance. A privately funded group, Enroll America, is undertaking its own push to boost enrollment.

The government site, healthcare.gov, includes links to 17 states and the District of Columbia that already have received conditional approval to run their own exchanges and are expected to begin enrollment on Oct. 1.

HHS Secretary Kathleen Sebelius said in a blog posted on the site last week that "anticipation is building" for enrollment in exchanges and the revamped healthcare.gov site will be the gateway for Americans to find their way to enrollment.

She said it's a site "where you'll be able to buy insurance from qualified private health plans and check if you are eligible for financial assistance—all in one place, with a single application."

She added that, "Many individuals and families will be eligible for a new kind of tax credit to help lower their premium costs. If your state is running its own Marketplace, HealthCare.gov will make sure you get to the right place."

The site has information on subsidies, or advance tax credits, that will be available to low- and moderate-income Americans. Beginning in October, people who sign up for the exchanges will be able to see how much they would receive as soon as they submit their marketplace applications. The tax credit is sent directly to insurance companies and applied to premiums.

By John Reichard, CQ HealthBeat Editor

January 16, 2013 -- A spate of recent press coverage raising doubts about different elements of the Obama administration's multibillion-dollar program to spur adoption of health IT has left the top government official in charge of that effort in a feisty mood and eager to push back against critics.

"Are you disappointed?" Farzad Mostashari asked a reporter who called last week after being offered an interview with the National Coordinator for Health Information Technology. "There is no cause for disappointment,'' he declared.

Launched under the 2009 economic stimulus law (PL 111-5), the program pays doctors and hospitals higher Medicare and Medicaid payments if they make "meaningful use" of the technology. And, starting next year, they'll get paid less if they don't meet the meaningful use standards, which aim to improve the quality, safety and efficiency of health care.

But the meaningful use program has been taking it on the chin lately. A Sept. 21 New York Times investigative piece concluded that the move to electronic health records may be contributing to billions of dollars in higher Medicare costs. A RAND Corp. study released Jan. 7 said that health IT is not yet fulfilling expectations of savings. And a Jan. 14 Washington Post editorial complained that "the rush to digitize patient records has not cut costs."

To which Mostashari says critics are jumping the gun.

He said the RAND study "actually did not say health IT increased costs." It said the cost savings that RAND had predicted in 2005 if health IT were widely adopted haven't come true. But "we didn't do anything in 2005 that you would expect to spur huge adoption," Mostashari said. "We did that in 2009. And, since 2009, I think there's been zero evidence that there's been any disappointment in cost savings. Because, for one thing, why would you expect to see cost savings within a year of the payments beginning to go out? These things take time."

The incentive program sets out three successive stages of two years each, he said. "You start to computerize so you can access the information, then you do some sharing of data in stage two, which we haven't gotten to yet. And then, in stage three, we hope that we will be able to see the outcomes on quality, safety and efficiency."

The RAND study "is actually very measured" in saying that before cost savings can occur, "it's going to take time to get adoption up to levels we see in the European countries, and we're making progress. You know, we doubled adoption in the last two, three years." RAND says "you have to be able to share information with patients in computable form, and the study gives a lot of credit for making that part of stage two meaningful use that hasn't started yet.

"I think their main finding that it's going to take time before the full benefits are appreciated and we need to work on interoperability, usability and payment reform is right," Mostashari added. "Health IT is a tool, so what you use that tool to improve is going to depend on your payment context." Under the health care overhaul (PL 111-148, PL 111-152), changes such as bundled payments, patient-centered medical homes and accountable care organizations are beginning to occur, and they are pushing providers to better manage and coordinate treatment. "That's the world where we can see electronic health records being an absolutely critical part of delivering lower cost" care that also is of higher quality, he said.

The Sept. 21 Times piece, however, laid out specific examples of hospitals that adopted health IT and a short time later sharply increased their Medicare billings. The story said providers were, thanks to the power of the new technology, better able to bill for more complex ER services and that in some cases they practiced "cloning" in which the results of more complex care reimbursed at a higher level were moved easily from one bill to another without actually performing the service involved. Donald W. Simborg, chairman of a federal effort to determine the potential of health IT to commit fraud, told the Times that the abuses are widespread. "It's like doping and bicycling," he said. "Everybody knows it's going on."

The Times analysis found that, overall, hospitals that received government incentives to adopt electronic records showed a 47 percent rise in higher-level Medicare payments between 2006 and 2010, compared with a 32 percent increase at hospitals that did not get any incentive payments.

But Mostashari says the systems in that analysis predated the meaningful use program and were focused on documentation and billing rather than on improving care.

The meaningful use incentive program encourages the adoption of systems that improve efficiency and quality, he said.

The health IT chief acknowledged, however, that health IT systems can be instruments of fraud. He said the Obama administration is launching a summit next month to address use of the technology to commit fraud and to develop counter measures.

He added that the meaningful use program requires health IT to be certified if a provider is to receive the bonus payments. And the certification process requires that systems contain certain elements designed to protect against fraud, he said. In addition, a number of recommendations Simborg made to control fraud have been adopted by HHS or are under consideration, Mostashari said.

One of the points of the RAND study was that cost savings aren't occurring because systems aren't interoperable, meaning that for example, a doctor in a private practice who is not affiliated with a hospital system can't access imaging results from tests performed in that system. Easy access to those records would avoid duplicative tests.

But Mostashari said that even before stage two and stage three of the meaningful use program begins and interoperability catches hold, providers are reaping rewards from health IT.

As an example, he pointed to a primary care physician he interviewed in New York City who was shocked to learn after adopting a health IT system that she gave flu shots to just 20 percent of her patients. She had assumed the figure was closer to 80 percent. That kind of tracking allows doctors to make improvements, he said.

As other examples he said that electronic prescribing of prescription drugs in outpatient settings has grown from 4 percent of prescriptions in 2009 to over 50 percent now, increasing the legibility of prescribing information and reducing medical errors.

And every example in which health systems have lowered costs while improving quality – at places like the Geisinger health system in Pennsylvania, the Mayo Clinic in Minnesota, and Denver Health in Colorado, has involved integral use as health IT.

But as long as spending keeps rising and there's no assurance that systemwide providers are using the technology in a meaningful way, questions about the incentive program will continue.

Those questions are premature, Mostashari suggests. "We need to take a longer view."

By Rebecca Adams, CQ HealthBeat Associate Editor

January 18, 2013 -- Statements this week by such large insurance companies as United Health Group Inc. that they will participate in some exchanges in 2014 mean these plans could offer some competition to the Blue Cross and Blue Shield Association of America, whose members dominate in many U.S. markets. But the commercial insurers are not rushing in to say how many marketplaces they will play in.

The top UnitedHealth executive said in a call with analysts last week that the company would probably offer plans in 10 to 25 exchanges. The company estimated that roughly 100 separate marketplaces offering individual and small-business plans could be offered throughout the country. Conceivably, each state could have two exchanges: one that serves individuals and one that handles business plans.

"The level of interest in exchanges will be driven by how we assess each local market," UnitedHealth Chief Executive Stephen J. Hemsley told investors on the call, a United spokesman confirmed.

Many insurers are trying to determine what steps they will take as the exchanges begin operating. Open enrollment is slated to begin Oct. 1.

Aetna expects to participate in up to 15 state exchanges.

"We will gain experience from that participation, assess the results and make decisions on where to participate in 2015," said Aetna spokesman Matt Wiggin. "Our decisions about which exchanges to participate in are based on a careful review of key attributes, such as our current market presence, our ability to offer strong networks and competitively priced products, and the regulatory environment in each state."

Humana officials did not return a call last week but have said in the past that they may participate in about 10 states.

Currently, Blue Cross and Blue Shield plans are well-represented in those markets and the Medicaid managed care market, in which Blue plans cover about 4 million Medicaid beneficiaries.

One insurance expert said the large insurers "are playing a little bit hard to get" with government officials who want them to participate.

"There's a little bit of a negotiating game going on right now," said Robert Laszewski, a consultant with Health Policy and Strategy Associates. "They are saying, 'Don't take us for granted.' That's smart."

For the large insurers, the individual and small-group market could present an opportunity if the exchanges work well and enrollment is robust. But they don't want to appear too eager, for fear that government regulators will impose too many burdens. The insurers know that if things go well, they can expand in future years.

But Laszewski noted that California, which has a fairly stringent regulatory climate, has said that 30 insurers have expressed interest in participating. In Oregon, a much smaller state that is further along than some other states in developing its exchange, about 16 insurers are interested.

"It doesn't seem as if the states will be short on insurance plans who are interested," he said.