By Rebecca Adams, CQ HealthBeat Associate Editor

January 23, 2013 -- Most states have started updating their Medicaid information technology and eligibility systems, as they must do by 2014 to comply with the health law, according to a survey the Kaiser Family Foundation released last week. But many states would have significantly more work to do in order to expand coverage to adults.

The health care law (PL 111-148, PL 111-152) requires states to use updated electronic-based systems starting in 2014 to determine eligibility and enroll people in Medicaid, regardless of whether a state plans to expand Medicaid coverage for adults as the overhaul allows. The Centers for Medicare and Medicaid Services is providing a federal matching rate of 90 percent for states to upgrade their IT infrastructure. As a result, 47 states had submitted plans to upgrade their systems and 42 of them had already started the system development work as of Jan. 1, according to the 88-page, 50-state survey, which is the organization's 12th annual report on Medicaid.

Regardless of whether a state expands, it will have to coordinate its Medicaid system with the new exchange markets to create a seamless "no wrong door" experience for people applying to programs so that individuals don't have to apply to separate programs.

And a number of states would have much work to do if they want to expand coverage to adults with income of up to 138 percent of the federal poverty level, which was $24,344 for a family of three in 2012. For instance, states that decide to expand cannot apply an asset test for the newly-eligible people. Most states don't use asset tests for children, but 27 states do impose an asset test for adults.

The law also will ban face-to-face interviews for people applying under the expansion. Six states now require those types of interviews for adults.

Those are just two examples of challenges for states that are weighing an expansion.

The expansion also would represent a major change in eligibility in most states. The median level of eligibility for parents was only 61 percent of the federal poverty line in 2012. The survey found that 33 states limit parent eligibility to less than the federal poverty line, and 16 states limit eligibility to people earning less than 50 percent of the poverty level, which was $9,545 for a family of three in 2012.

Coverage for adults who are not parents was more limited. The report found that just nine states—Arizona, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Minnesota, New York, and Vermont—provide benefits to other low-income adults that mirror the coverage for parents.

"As states face a shrinking timeline to be ready for 2014, much work remains to be done and many key decisions still need to be made," said the report.

About 20 states have decided to expand while 10 governors have said that they oppose expansion, said Kaiser Commission on Medicaid and the Uninsured Executive Director Diane Rowland at the event.

A policy analyst familiar with Kaiser's report said that all of the Medicaid changes underway, including those to simplify and expand the program, represent a significant change to the program.

"It is a heavy lift for Medicaid but not just because of the expansion," National Academy for State Health Policy Program Director Sonya Schwartz said in an recent interview. But Schwartz, who tracks Medicaid expansion decisions, said that she is optimistic states are up to the task.

Centers for Medicare and Medicaid Services Deputy Administrator Cindy Mann said at the Kaiser event that states are at varying stages of progress, since some jumped out of the gate early while others waited for a while. The agency is working closely with states in such tasks as sharing technical information and identifying vendors to help rebuild IT systems, a necessary element of simplification and expansion.

"There is a lot of accelerated activity going on," Mann said.

"We understand it's a lift," said Mann, but said that "we're all pulling together and we'll make it."

In other findings, the Kaiser report said that coverage in most states was fairly stable last year. Most states did not raise copays for families, even though many states were struggling with tight budgets. Nine states did raise copays, as the law allows, despite maintenance of effort restrictions on significant premium increases. The law also requires states to maintain eligibility rules except under limited exceptions, which led to few eligibility changes last year. Three states—Hawaii, Illinois and Minnesota—reduced eligibility for adults, while two states—Colorado and Utah—expanded coverage for adults in 2012.

• Report 
• NASHP website (pdf)

By John Reichard, CQ HealthBeat Editor

January 24, 2013 -- Researchers and hospital officials say that various projects around the country to improve quality and lower costs are bearing fruit, with the most recent example showing savings from a sharp drop in bloodstream infections in hospital neonatal intensive care units.

Central line infections—which are associated with tubes placed in the neck or chest of a hospital patient to deliver important medicines—fell by 58 percent in less than a year in a program involving 100 neonatal intensive care units in nine states, according to the Agency for Healthcare Research and Quality (AHRQ).

"These remarkable results show us that, with the right tools and dedicated clinicians, hospital units can rapidly make care safer," Carolyn Clancy, director of AHRQ, which collaborated with hospitals in the public-private effort, said in a news release.

By relying on teamwork to ensure safe practices were followed, including the use of checklists with simple steps such as hand washing to avoid infection, the program prevented 131 infections and up to 41 deaths, the agency said in a news release. It also avoided more than $2 million in health care costs in treating 8,400 newborns.

Central lines can remain in place for long periods of time, making them a gateway for germs if safe practices aren't followed. Last fall, AHRQ announced a 40 percent drop in central line infections from a separate four-year public–private effort that involved 1,100 adult intensive care units in 44 states.

The program to prevent central line infections—called the Comprehensive Unit-based Safety Program—was developed by Peter Pronovost, director of the Armstrong Institute for Patient Safety and Quality at Johns Hopkins Medicine in Baltimore.

"The successes of the projects are proof that a great deal of improvement can happen in a relatively short time frame," said Maulik Joshi, a senior vice president at the American Hospital Association (AHA).

Joshi highlighted other projects at a briefing sponsored by AHA. Projects involving the Hospital Engagement Network, an AHA initiative resulting from a two-year contract with the Centers for Medicare and Medicaid Services, have saved $74 million in 2012, Joshi said. They include reductions of urinary tract infections, surgical infections, pressure ulcers, and hospital readmissions. The network supports the Center for Medicare and Medicaid Services' Partnership for Patients campaign, which former CMS Administrator Donald M. Berwick called the most ambitious national effort ever to reduce medical errors.

Executives from various individual hospitals at the briefing acknowledged that in a fee for service payment environment, reducing infections and cutting readmissions lowered their revenues but said patient well-being is a paramount. Harry Alberti, vice president for medical affairs at Verde Valley Medical Center in Cottonwood, Ariz., said that his facility's approach is that if an initiative does the right thing by patients, "the money will come."

Research released this week also showed that helping patients stick to follow-up treatment regimens after they are discharged from the hospital helps to prevent readmissions.

A study published Jan. 23 in the Journal of the American Medical Association examined the impact of efforts by so-called quality improvement organizations to prevent readmissions in this way. The "QIOs," which contract with the Medicare program to improve care, worked in 14 communities on projects to assist patients after they leave the hospitals.

The average rate of rehospitalizations within 30 days of discharge in those communities fell from 15.21 per 1,000 Medicare beneficiares in 2006 to 2008 to 14.3 per 1,000 in 2009 to 2010. Among the efforts to reduce readmissions were in-home visits and phone calls by nurses to make sure patients understood what medications they were supposed to be taking and that they were making needed follow-up appointments.

By Jane Norman, CQ HealthBeat Associate Editor

January 22, 2013 -- A just-retired Nebraska senator who was the inspiration for the famous "Cornhusker Kickback" claim attached to the health care law is the new CEO of the influential National Association of Insurance Commissioners (NAIC), the group announced last week.

Ben Nelson, a moderate Nebraska Democrat who decided to not seek a third term in 2012, is a natural for the NAIC slot given his background as the director of the Nebraska Department of Insurance in the 1970s and CEO of Central National Insurance Co. from 1977 to 1981. Nelson also worked as executive vice president and chief of staff for the NAIC in the 1980s.

"After years in government, this is a homecoming for me," Nelson said in a statement. NAIC officials said Nelson will serve as the NAIC's chief advocate and spokesman in Washington, signaling a more prominent profile in the nation's capital for the organization of state insurance regulators. The NAIC already has offered extensive advice and recommendations to the Department of Health and Human Services as the agency rolls out regulations on the overhaul.

"Senator Nelson's impressive credentials and deep knowledge of state insurance regulation are simply unmatched," Jim Donelon, elected president of NAIC and Louisiana insurance commissioner, said in a statement.

Donelon also said that "Senator Nelson has a keen understanding of the insurance marketplace, which will make him an effective advocate for the preservation of our state-based system of regulation."

But when it comes to health care, it's Nelson's role in the debate over the health care law (PL 111-148, PL 111-152) that's most memorable. The "Cornhusker Kickback" he was alleged to have obtained in exchange for his vote—a pot of money to finance the Nebraska Medicaid expansion—was even cited by Justice Antonin Scalia during the Supreme Court oral arguments over the law.

Nelson and his aides, though, have long maintained that his position was misunderstood and his vote in favor of the overhaul hinged on much more than a deal just for his home state.

Nelson was worried about what the cost of the law's Medicaid expansion would be to Nebraska, and so he asked Senate leaders to expand the Medicaid funding for all states, Nelson and his aides have said. Senate Democratic leaders then put in the Nebraska provision as a placeholder because they didn't have a dollar estimate for the cost to all the states, Nelson said.

In addition, he said he was opposed to any possible option in the bill for people to sign up for a government-run insurance program, and he was worried about funding in the bill for elective abortions. "The Medicaid was important, but it was not a condition for my support," Nelson told Fox News in a 2010 interview.

Nebraska's governor ultimately decided against a Medicaid expansion after the court ruled that states could opt out without losing all their Medicaid funds.

According to a statement from NAIC, Nelson will work with federal and international governments, state government associations, consumers, and insurance industry representatives. "His rare and valuable combination of experience in insurance and government will be a tremendous asset to our organization," Donelon said.

Nelson will replace Andrew Beal, who has been acting CEO since November, when Therese M. Vaughan left the position of CEO. Vaughan, the former Iowa insurance commissioner and a former NAIC president, had been CEO since 2009. Beal will resume his position with the NAIC as chief operating officer and chief legal counsel.

Nelson will actually be holding down two jobs. In a separate announcement, the Washington communications and public affairs firm Agenda said Nelson will join as a senior adviser "and provide clients with high-level policy and political guidance." He is not yet able to lobby because ethics rules prevent a senator from lobbying until two years after leaving office.

Craig Pattee of Agenda said members of the newly created advisory board at the firm will be senior officials with extensive policy and management experience in state and federal governments.

By John Reichard, CQ HealthBeat Editor

January 25, 2013 -- A proposed federal rule allowing employers to tie stronger pocketbook incentives to employee wellness programs should be rewritten to prevent entire families from being punished financially, the Georgetown University Center for Families and Children said in a recent letter.

Other groups weighing in on the proposal said it places intolerable administrative burdens on doctors and that it permits too many employees to be exempted from wellness standards.

At issue is a proposal jointly issued by the departments of Labor, Treasury and Health and Human Services. It's intended to implement a provision of the health care law (PL 111-148, PL 111-152) that increases the maximum permissible financial rewards and penalties relating to employer sponsored wellness programs.

The health care law says maximum permissible rewards and penalties will increase in 2014 from the current ceiling of 20 percent to 30 percent of the cost of health coverage. It also says that in the case of programs to prevent or decrease tobacco use, the maximum rewards could be increased to as much as 50 percent.

The financial incentives can be tied either to simple participation in wellness programs or to meeting "health-contingent" standards, such as those for weight or cholesterol levels in the blood.

Employers have the power under a 2006 federal regulation to vary premiums or cost-sharing for family coverage, not just employee-only coverage, if family members are eligible to participate in a wellness program, the Georgetown center says. Like the 2006 rule, the proposed rule recognizes that power, the center adds. The proposal sought comment on whether the reward or penalty should be prorated for family members failing to meet the standard set out in a health-contingent program.

"We urge the departments to adopt an approach that allows health-contingent rewards only for an employee, not for other individuals—especially children—who are covered under an employee's family plan," the Georgetown letter said. The comment also was signed by the children's advocacy group First Focus and Voices for America's Children.

"Families should not be penalized based on a child's ability or willingness to participate," the letter said. The rewards and penalties are problematic when adult family members are involved as well, it said. They "may not have access to the same resources and supports as an employee, such as a fitness center, health care provider, or health coach located at the workplace," the letter added.

Joe Touschner, a health policy analyst with the Georgetown center, said in a telephone interview that while a number of employers invite families to participate in employer wellness programs, it's unclear how many actually tie financial incentives to family participation.

Meanwhile, the Texas Medical Association is worried about the burdens wellness programs place on physicians' time. Doctors are complaining that the programs can require "many pages of paperwork" to verify that their patients have met the requirements of a wellness program or that the patient qualifies for an exemption. The association wants the final rule to say a physician verification form can be no longer than a page and that a doctor is entitled to charge a fee for filling it out.

For its part, the Wisconsin Association of Health Plans said it's worried about a part of the proposal that requires use of a "reasonable alternative standard" if a particular health-contingent program isn't in the view of a worker's doctor appropriate because of a medical condition. This alternative could be granted "without limitation and could offset any potential gain of the wellness program," the association said.

The American Public Health Association (APHA) said that while it "supports the goal of increasing employee participation in wellness programs, we are concerned about incentives that vary employees' costs of health care coverage. There is little or mixed evidence that such incentives are effective at improving health outcomes, and there is potential for them to have negative impacts on health outcomes by increasing costs and reducing access to health care." It also expressed concern that women, low-income, and minority individuals could be at a disadvantage when employers tie the cost of insurance to the ability to meet certain health targets.

APHA said it also "opposes the fact that a program's 'reward' could actually mean increased costs for some individuals." It said that "one allowable reward is the 'absence of surcharges' for those who meet wellness program goals, which appears to mean that employers can actually increase insurance costs for individuals who fail to meet program goals, and then reward successful employees merely by not raising their costs."

By John Reichard, CQ HealthBeat Editor

January 23, 2013 -- The growing concern among insurance analysts that coverage will be unaffordable in the new health care exchanges might create a fresh opportunity for federal officials to be persuaded to trim requirements in the final essential health benefits (EHB) rule, which is expected out in February or March.

Employers and insurers certainly hope so. With a few weeks to go before the final version is expected, they held a news briefing last week to highlight six recommendations for shaping the rule in a way that they say makes coverage less costly.

Change the Essential Health Benefits Coalition wants the final regulation to include:

• Scaling back requirements for pediatric dental and vision care benefits.
• Allowing the adoption of "medical management techniques" to ensure that the use of required benefits is consistent with evidence-based clinical practice guidelines.
• Backing off a requirement that plans cover one or more prescription drugs in each drug category.
• Limiting requirements for "habilitative services" that help people with medical conditions acquire new skills, such as helping a child with autism improve language skills or a person with cerebral palsy learn to walk (as distinct from rehabilitation services to recover lost skills).
• Reconsidering the inclusion of state-mandated benefits.
• Considering an employer's entire contribution to a health savings account when determining maximum deductibles.

The Department of Health and Human Services (HHS) unveiled a proposed rule on essential health benefits Nov. 26, 2012. In a recent letter to HHS Secretary Kathleen Sebelius, Republican Sam Graves of Missouri, chairman of the House Committee on Small Business, noted that some of the benchmark plans that states may pick to comply with the benefits rule might not cover all the essential benefits.

"Virtually all small businesses will be forced to supplement state-selected policies that will not include coverage for mental health, substance abuse, pediatric dental and vision, habilitative care and additional prescription drugs," Graves wrote. Many small-business owners will struggle to afford any health insurance coverage, let alone the supplemental coverage envisioned by the proposed rule, he said.

Neil Trautwein, vice president of the National Retail Federation, said at the briefing that insurers are struggling to put together affordable "bronze" plans to be sold in exchanges. Bronze is the least generous of the "metal" categories of coverage the health care overhaul (PL 111-148, PL 111-152) says must be offered.

Asked to mention one issue that must be addressed in the final rule to make coverage affordable, Trautwein said "it's hard to boil down a list of recommendations into a single issue, but we want the EHB [final rule] to be more like private coverage is today, not like Medicare coverage is in terms of the specificity of included benefits." And, he said, it should be easier to change benefits. The fact that private insurance plans can react more quickly to medical advances and don't specify coverage service by service "is a strength of private coverage, and we would hope that the EHB" would follow that model, he said.

Geraldine O'Shea, an official with the American Osteopathic Association, said a requirement that benefits must follow evidence-based clinical practice guidelines would be the best way to ensure affordability.

Asked about the tipping point for when benefit requirements would drive premiums up so high that employers will no longer provide coverage and pay penalties instead for not covering workers, Paul Fronstin of the Employee Benefits Research Institute said "it might not take any increase" in premiums for that to happen. There's already been a 10 percent drop recently in the proportion of employers who offer health coverage, he said.

Large numbers of employers may not drop coverage in 2014, but they could start to do so over the next decade. Trautwein added that "it's tough to absorb additional cost" in the retail trade. "We have very thin profit margins."

Pulling the Centers for Medicare and Medicaid Services (CMS) in the opposite direction are patients' advocacy groups, who say not covering certain medications or services could have devastating consequences. They've written CMS to urge coverage of new drugs and to ensure coverage of more than one medication per drug category. The groups include those representing patients with HIV/AIDS, hemophilia, kidney disease, mental illness, and a wide range of other conditions.

By John Reichard, CQ HealthBeat Editor

January 22, 2013-- Hospital associations in almost two dozen states are once again trying to erase a provision of the health care law they say boosts Medicare payments to Massachusetts hospitals at the expense of facilities in other states.

After a failed attempt to do so last year, they think they've got a better shot in 2013.

A Jan. 16 letter from 20 state hospital associations and the National Rural Health Association says that because of the provision, Massachusetts hospitals obtained an additional $367 million in Medicare payments in fiscal 2012 that otherwise would have gone to other states. "If left uncorrected, hospitals in 49 states will experience reduced funding of more than $3.5 billion over the next ten years as a direct result of this manipulation," the letter says.

Many of the same state hospital associations lobbied a year ago to eliminate the provision, without success. They did so in a political climate in which Democrats did not want to reopen the health care law in fear of exposing it to many other attempts to change it.

Intervention by the Obama administration would disadvantage Massachusetts. But those who favor eliminating the provision are more hopeful now, because they see signs of support from within the administration, They also see a better chance this year Democrats will be willing to reopen the health care law (PL 111-148, PL 111-152) to tweak it in advance of its full implementation next year.

The provision, section 3141 of the health care law, relates to elements of Medicare payments called "the hospital wage index" and the "rural floor." The index is used to determine how a hospital's Medicare payments should be adjusted to account for its labor costs. The floor is a Medicare rule that requires hospitals classified as urban to be reimbursed at least as much as rural facilities for wages paid to doctors and staff.

When Medicare makes significant changes in payment levels to account for a hospital's wage rates, it does so in a budget-neutral way. So if one hospital gets paid a lot more under the wage index, that increase must be offset by reducing payments to another hospital or hospitals.

This budget neutrality provision has at various times either been enforced on a national or state basis. If it's done nationally, one hospital's increase is offset by reductions to hospitals nationwide. If it's done statewide, an increase at one hospital within a state comes at the expense of other hospitals in that same state, not nationally.

In fiscal 2008, the change in status of a 19-bed hospital on Massachusetts' Nantucket Island set the stage for a big increase in Medicare payments to hospitals throughout the state. The facility switched from being designated a "critical-access hospital" to being an "IPPS" hospital, which falls under Medicare's inpatient prospective payment system. The switch to IPPS triggered the rural floor requirement, which set up all other hospitals in the state to get higher payments because they were all classified as urban and would have to be compensated for wages at the same rate as the Nantucket facility and its high wage costs.

Centers for Medicare and Medicaid Services(CMS) officials saw the tactic as a manipulation of the payment system by Massachusetts hospitals that would come at the expense of hospitals nationwide. So it countered the move by saying that budget neutrality would be enforced on a statewide basis. So increases based on the wage index in the state would come at the expense of other hospitals in Massachusetts, and the state's hospitals as a whole would not benefit as they would under national budget neutrality. CMS also said it wanted four years' worth of cost reports from the Nantucket facility before calculating payment adjustments based on its wage expenses.

Enter the health care law. Section 3141 switched budget neutrality back to being national, not statewide. And on Oct. 1, 2011, the Nantucket facility got its wage index adjustment based on the four years of cost data. That produced the $367 million increase in Medicare payments in fiscal 2012. The huge imbalance of urban versus rural facilities in the state—the Nantucket facility was the only one designated as rural and all the others were urban—combined with the high wage rates on Nantucket meant a windfall for Bay State hospitals generally.

It also triggered the backlash from other state hospital associations. Hospital associations seeking removal of the section 3141 provision are from Alabama, Arkansas, Delaware, Georgia, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Virginia, West Virginia, and Wisconsin.

The 20 hospital associations were not alone in criticizing the health care law provision. In a July 11, 2011 Federal Register notice, CMS referred to it as a "manipulation." Former CMS Administrator Donald Berwick, an Obama administration appointee, was quoted in a Jan. 13, 2013, Boston Globe story as using the same word to describe the provision. In addition, House Republicans on the Ways and Means Committee and Republican Tom Coburn of Oklahoma in the Senate may pursue legislation to eliminate the provision.

The influential Medicare Payment Advisory Commission (MedPAC) also weighed in against the provision after the health care law passed. It said in a June 17, 2011, letter to Medicare officials that as a result of a change "in one small [Massachusetts] hospital's status" under the provision, "and the subsequent change in the wage index, payment rates for urban hospitals in Massachusetts will increase by 8 percent. ... These extra payments will be made budget neutral at the national level, and therefore all hospitals—including rural hospitals—will absorb the financial loss," MedPAC said in the letter. "This is a clear example of how the current system of exceptions is not an equitable method of adjusting for input prices. A new wage index system is needed."

The Massachusetts Hospital Association (MHA) defended the provision last year by saying that dropping it would harm 30 states. It also said the provision was supported by the American Hospital Association. In a statement Jan. 17, MHA said that "national budget neutrality is the norm, and has been since 1997. There are myriad other reimbursement adjustments under the Medicare program, which all-told benefit about a third of all hospitals in the country. These Medicare adjustments are paid for—and have always been paid for—using a national allocation to which all hospitals contribute. Thus there have always been winners and losers and Massachusetts has been on both sides of that equation."

The association added that "in 2008, the rural floor adjustment was singled out for different treatment under budget neutrality. What the federal health reform law did was simply reinstate the payment model to its original form."

Nevertheless, data that hospital sources say they obtained from CMS indicate that most states take a financial hit if the provision isn't eliminated. In an environment in which it may be easier to open up the health care law if Democrats want to tweak it to get ready for full implementation in 2014, critics of the provision may have a better chance of eliminating the provision this year than they did last year. But while the great majority of states would likely be on their side, opposition could come from some other states in addition to Massachusetts.

While critics of the provision say it comes at the expense of all the other states, it turns out the data that industry sources obtained shows that the switch to national rather than statewide budget neutrality also benefits other states: Alaska, Arizona, California, Colorado, Connecticut, New Hampshire, New Jersey, and Rhode Island. How they benefit varies, but none nearly as much as Massachusetts.

In a number of these states, hospital association officials say, the number of hospitals that are considered urban still don't have wage scales that come up to the rural floor, and the adjustments are understandable. The officials also say they are working to make sure that states whose hospitals legitimately benefit from the rural floor can maintain that benefit while arrangements under which all hospitals in a state get higher payments that have no relationship to actual costs are eliminated.

Nothing is easy when it comes to making changes in Medicare payments.