By Rebecca Adams, CQ HealthBeat Associate Editor

June 20, 2013 -- It's a question that continues to intrigue health economists and policy experts: Will the recent slower-than-expected growth in national health care spending continue? Medicare trustees cautioned lawmakers that the trend could go either way.

Robert Reischauer, a Medicare and Social Security trust fund public trustee and former Congressional Budget Office director, told the House Ways and Means Health Subcommittee he sees "reasons to be cautiously optimistic about the future course of health care spending but also reasons not to be complacent or to think that whatever bend might have been put in the cost curve will be sustained without further actions."

The spending projections Reischauer and fellow trustee Charles P. Blahous used to produce the May 31 Medicare trustees report enabled them to estimate that the program's hospital insurance trust fund will be insolvent in 2026, two years later than projected last year.

Reischauer, who the two trustees agreed would focus on the trends in health care costs that their report outlined, noted that the national spending growth rates of the past few years are the lowest recorded in more than half a century.

The Medicare trustees made some assumptions in their report about future spending growth. One of the first steps in calculating long-term Medicare spending is to figure out what national spending growth will be in the overall health care sector. The Medicare trustees assumed that per capita health care cost growth will average 1 percent more than per-capita growth in the Gross Domestic Product every year over a 75-year period.

They also assumed that the rate of growth would decline over time as medical care takes up more and more of the economy.

"We do not expect medical care spending to grow to the point where our economy is devoted to nothing other than health care," said Blahous in his testimony. "We should not expect that in the future we will all be homeless, naked and starving but with impeccable health care."

But long-term projections are notoriously uncertain, and it's difficult to know for certain how long the lower-than-usual spending growth will last.

From 1980 to 1990, spending grew by an annual average of more than 10 percent per person. In the decades since then, spending growth fell. It grew an average of 5.6 percent from 1990 to 2000, when managed care plans were holding down costs. In the past five years, average spending growth has plummeted even more. In 2011, the latest year that full data are available, growth was 3.2 percent.

The growth in Medicare was particularly low. Per capita Medicare spending in fiscal 2012 grew by less than half a percent.

Future Spending Growth a Toss Up

Reischauer gave lawmakers a list of reasons why the low growth might continue, and why it might not.

One major reason spending was less than expected is that the economic downturn caused people, particularly those with employer-sponsored insurance and Medicaid, to be reluctant to spend their money on out-of-pocket medical costs. Another is that policymakers cut Medicare and Medicaid spending as part of the health care law (PL 111-148, PL 111-152) and state laws. And there haven't been a lot of technological breakthroughs or expensive cures in the past few years to push up costs. Instead, people have turned to lower-cost treatments, such as generic drugs.

But that could change, Reischauer said, if the economy improves significantly or some new medical technologies, perhaps based on new knowledge about the role of genes in disease, are produced.

And part of the health care law could drive up prices because as more people get coverage starting in January, the demand for medical services will rise. If there are shortages of providers, that could allow medical professionals to demand higher rates from insurers.

IPAB Impact Probed

Reps. Tom Price, R-Ga., and Adrian Smith, R-Neb., asked about the role of cuts in the health care law and the impact that the Independent Payment Advisory Board (IPAB) might have in the future.

Blahous said that trustees have a "great diversity of views" on whether the health care cuts or IPAB might actually restrain spending as much as some projections predict.

Former Centers for Medicare and Medicaid Services chief actuary Rick Foster has predicted in the past that Congress will block some of those cuts, much as they have for scheduled Medicare reductions in physicians' payments.

One other thing Reischauer said might lead to higher spending for privately-insured people is that the consolidation of medical providers "might boost the pace of future spending growth."

The health care law calls for providers to work together and coordinate patients' care. The downside is that sometimes the easiest way to do that is for a hospital to buy a physicians' practice or another provider group, and that can give the consolidated providers more negotiating power with commercial insurers.

That doesn't really affect Medicare, said another health policy expert who did not testify at the hearing, Chapin White of the Center for Studying Health System Change. White said in an interview that in the past decade or more, "providers have been beating up on health plans" in negotiations over rates. But now, said White, "the pendulum is at the extreme end. Plans are going to get their act together and start being more aggressive. Consolidation is a huge problem but if commercial plans can't solve that problem, they won't continue to exist."

Reischauer said during the hearing that the concern that Congress has expressed to providers about high costs, through cuts in the health care law and signals that lawmakers want more efficient care, may be causing medical professionals to curb overspending and look for ways to save money.

"I think it is perfectly plausible that over the course of next 10, 20 years that we will hit the projected numbers that are in the [trustees'] report but as I said in my text, this presumes that there will be a significant transformation of our delivery system—not just the delivery system for Medicare but the private sector as well," Reischauer said. "But I think we are on our way on that because of the pressure that Congress has been exerting on health care providers.

• Ways and Means hearing (PDF)

By Rebecca Adams, CQ HealthBeat Associate Editor

June 17, 2013 -- The problems in implementing a two-year increase in Medicaid payments for primary care providers raises questions "as to whether an extension of the policy is warranted," the Medicaid and CHIP Payment and Access Commission said in its June report.

The health care law (PL 111-148, PL 111-152) requires rates for primary care providers to equal at least the level of the Medicare reimbursement for those providers in 2013 and 2014. This requirement had been projected to raise Medicaid rates by an average of 73 percent in 2013.

The provision was supposed to take effect on Jan. 1. But by late May, only four states had actually started giving providers the higher rates.
The report outlined several challenges in implementing the increase. Commission staff interviewed officials from October 2012 through January 2013 in six states: Alabama, California, Indiana, Massachusetts, Oregon and Rhode Island.

"States must make administrative changes in order to comply with these requirements—changes that are not easy to make, particularly within the short time frame between the publication of the final rule and the effective date of the provision," said the report. "The requirement that the payment increase also apply to managed care represents an additional layer of complexity."

To implement the payment hike, state officials were supposed to file a state plan amendment with the Centers for Medicare and Medicaid Services (CMS) by March 31. By last week, federal reviewers had approved state plan amendments in nearly half the states, said the report. The deadline for the rest of the reviews is the end of this month.

At the time of the interviews, the biggest challenges reported by the officials included:

• Identifying providers and making changes to claims processing systems. The changes needed "are not routine," the report noted, and states will bear some of the costs since the expenses are matched at a state's regular federal matching rate. Those rates vary, but average 57 percent of costs. The data systems changes include the ability to note which providers are eligible, pay higher rates to those who qualify, and track the money so that it can be reported to CMS.
• Acting quickly despite late information from CMS. "Publication of the final rule on November 6, 2012, gave states little time to be ready for making increased payments on January 1, 2013," said the report.
• Adjusting managed care payments. Many states use managed care plans for their Medicaid population. To meet the requirements of the law, states have to adjust their capitation methodologies, which is a complex task for several reasons, including the fact that managed care plans may use different payment codes than those used in Medicare. The changes also were expected to trigger a reopening of negotiations between states and managed care plans over contracts.

"In the months ahead, the commission will continue to monitor implementation and will be looking at efforts of state, federal, and academic evaluators to see what can be learned to inform future work," said the report.

• Commission report (PDF)

By Dena Bunis, CQ HealthBeat Managing Editor

June 20, 2013 -- Consumer rebates under the health law's medical loss ratio (MLR) rule will total less than a quarter of what insurance companies paid out in 2012. That, say federal officials, shows that the incentives in the overhaul are working.

Under the health law (PL 111-148, PL 111-152), insurers who do not spent 80 cents of every premium dollar on care for patients as opposed to administrative fees, advertising and profits must pay the difference back to policyholders. In August, rebate checks totaling $500,000 will go out to 8.5 million consumers, for an average of $100 per family, Centers for Medicare and Medicaid (CMS) officials said last week. In 2012, rebates totaled $1.1 billion, went to 12.8 million consumers and averaged $151 per family.

Gary Cohen, director of the Center for Consumer Information and Insurance Oversight, said on a conference call with reporters that the 2012 results show insurers are getting with the program. "This means that more insurance plans are adjusting to the market and learning to operate more efficiently and cost-effectively," he said.

Another reason for the much lower rebates, Cohen said, is because in many states there were no MLR rules in place so insurers had to adjust their premiums and spending a significant amount to avoid the rebates. Last year was the first time plans had to comply with the new MLR regulation.

While the amount of the rebates went down, CMS officials have calculated that in addition to the rebates, the public saved $3.4 billion in premium costs they would have paid had the new MLR system been in effect.

The reasons the 80/20 rule moderates premiums is that if insurers price their policies at a premium rate that doesn't allow them to meet the standard, "they have to give the money back," Cohen said. "The incentive is to be at least at the standard."

Cohen acknowledged that the $3.4 billion in up-front premium savings can not all be attributed to the MLR.

"Other aspects of the Affordable Care Act contributed to this and other market forces," Cohen said.

The bottom line, said Cohen, is that "this year compared to last year, what we've seen is that the medical loss ratios are going up, administrative costs and premiums are going down."

A variety of studies have shown that health care costs have been moderating. New figures released this week by the Labor Department showed that for the first time in almost four decades, consumer health care costs fell. Labor officials attributed the decline to a combination of factors, including the cost of insurance, prescription drugs, doctor visits, medical supplies and hospital stays.

Not all consumers will get a rebate check in the mail. Other ways the money can be returned to them include:

• A lump-sum reimbursement to the same account that they used to pay the premium if by credit card or debit card;
• The rebate can be used to reduce future premiums;
• Employer can send insured workers a check or use the money to reduce premiums, or can apply the rebate in another way, such as by providing more generous benefits.

"Consumers are finally seeing a real shift in the way health insurance companies spend their hard earned dollars," Sen. Jay Rockefeller, D-W.Va., said in a statement. "Thanks to the Affordable Care Act, gone are the days when insurers could put paper pushing, marketing and other frivolous costs ahead of care. Transparency is changing the system and I'm all for it." During the health law debate, Rockefeller pushed for the MLR requirement.

By Dena Bunis, CQ HealthBeat Managing Editor

June 19, 2013 - There would be 10.4 million more legal immigrants in the United States by 2023 if the immigration overhaul bill that the Senate is debating were to become law, and that could cost the federal government $82.3 billion more in health care law subsidies over a decade, according to the Congressional Budget Office (CBO) score of the legislation.

While the pending bill (S 744) does not provide health care law subsidies to the estimated 11 million illegal immigrants who would be eligible to transition to legal status, the measure also includes a number of family unification and employment provisions that would add to the number of legal immigrants in the country. Those new legal immigrants would be eligible for a variety of federal benefits, including access to the new health care law exchanges and the subsidies that the overhaul (PL 111-148, PL 111-152) provides to help people afford their insurance premiums.

Overall, the CBO says, direct costs from the health care law and such programs as Medicaid, the Children's Health Insurance Program (CHIP), food stamps and Medicare would cost $259 billion from 2014 to 2023.

However, the analysis also says that even with those and other costs of implementing the immigration legislation, because of increased payroll and income taxes that these new legal immigrants would pay, enactment of the measure would save the federal government $175 billion from 2014 to 2033.

When it comes to the 11 million illegal immigrants who could transition to legal status, the Senate bill makes clear that such provisional-status immigrants could not get health care law benefits. Lawmakers, including Democrats who have long fought to provide health coverage to all immigrants, have shied away from a debate on health care and the immigration overhaul, citing the emotional politics involved in putting the two issues together.

But, the CBO analysis said, for such means-tested programs as Medicaid and CHIP, the Senate bill is "unclear" as to exactly who would be eligible for such programs and when.

For such programs, the CBO analysis says that if the Senate bill were enacted, "executive branch agencies would probably face pressure from states and other stakeholders to provide people who are lawfully present in the United States with the federal benefits that are available to qualified aliens, including assistance provided through Medicaid, CHIP, SNAP (food stamps), student loans and Pell grants."
Because of that, the CBO analysis assumes that some people who attain provisional status, a blue card or a new V-visa would not be excluded from some federal benefits.

"Specifically, CBO incorporates the costs of providing SNAP benefits for individuals under age 18 and providing Medicaid and CHIP coverage under the CHIPRA option to children and pregnant women,'' the analysis said.

Under the 2009 reauthorization of CHIP, states could waive the five-year waiting period before newly legalized immigrants could be eligible for Medicaid and CHIP. So far, 22 states have taken advantage of that provision.

By Emily Ethridge, CQ Roll Call

June 19, 2013 -- The Obama administration is behind schedule on some key activities required to set up the federally run individual and small business health insurance exchanges, or marketplaces, the Government Accountability Office (GAO) said in two recently issued reports.

The GAO said in both reports that the Center for Medicare and Medicaid Services' (CMS) changing role in running the exchanges and the list of required activities left to complete "suggest a potential for implementation challenges going forward."

"Much progress has been made, but much remains to be accomplished within a relatively short amount of time," said the GAO in the report on the federally run individual exchanges. "And while the missed interim deadlines may not affect implementation, additional missed deadlines closer to the start of enrollment could do so."

Republicans jumped on the reports as evidence that the administration will fail to make the exchanges fully operational on time.
"We're less than four months away from open enrollment for the Obamacare exchanges, but the programs' details have more holes ... than Swiss cheese, and this Administration still wants to guarantee that the exchanges will provide insurance coverage to millions of Americas? Give me a break," said Orrin G. Hatch of Utah, ranking Republican of the Senate Finance Committee, in a statement.

The administration emphasized the progress it has made and said the exchanges, created under the 2010 health care overhaul (PL 111-148, PL 111-152), would be functioning by Oct. 1, when open enrollment begins. Coverage though the exchanges is slated to begin Jan. 1, 2014.

"We are working every day to establish individual and small business marketplaces where many Americans will have access to quality, affordable coverage for the first time," said Joanne Peters, a spokeswoman for the Department of Health and Human Services (HHS), in an email. "We have already met key milestones and are on track to open the marketplace on time."

Democratic Rep. Jim McDermott of Washington defended HHS, comparing the implementation of the health care law to that of Medicare in the 1960s. The program for the elderly is now the bedrock of the country's social safety net but at the time, workers going door to door to enroll seniors were angrily turned away, said McDermott.

"As the president has said, there will be bumps in the road but we will get there," McDermott said in a statement. "Rather than scaring people, let's focus on the real work needed to make sure that this reform continues to help the millions of Americans it's intended to benefit."

Hatch, House Energy and Commerce Chairman Fred Upton, R-Mich., and House Oversight and Government Reform Chairman Darrell Issa, R-Calif., requested the report on the individual exchanges while House Small Business Committee Chairman Sam Graves, R-Mo., requested the report on the small business exchanges.

One of the potential sources of delays comes from the CMS role in working with the 15 states that will be partners in the federally run exchanges in some way, said the GAO. CMS plans to operate the exchanges in 34 states total. In the partnerships it remains unclear which exact activities the federal government will take on and which states will handle, GAO said.

In addition, CMS may need to take on some activities in states seeking to operate their own exchanges if those states fail to make adequate progress on the necessary activities. As of May 2, CMS had not granted final approval to any state to operate its own exchange or participate in a partnership exchange, and "some of these exchanges may be under conditional approval when enrollment begins," the GAO said.

CMS did not respond to a question on when it would give final approval to those states.

Other unfinished activities lie in the areas of eligibility and enrollment, plan management and consumer assistance, the GAO said. For example, funding awards for navigators, who will assist consumers through the enrollment process, were delayed by about two months.

CMS also has not finished reviewing and certifying the qualified health plans that will be offered in the federal exchanges, the GAO said, although it completed the health plan submission process earlier this year.

The GAO report also noted the federal call center for the exchanges and the relaunch of the healthcare.gov website are not yet finished. Both are meant to be done this month.

The GAO also found some potential for delays in implementing the Small Business Health Option Program (SHOP) exchanges. Eighteen states will run their own SHOP exchanges while CMS will run them in the remaining states.

States were behind schedule on about 44 percent of their key activities for the SHOP exchanges, the GAO said, although it added that CMS had revised many of those target dates and other delays were not expected to affect the exchange operations.

In addition, CMS had delayed by about two months parts of a program to provide outreach and enrollment assistance to small employees and employers. Previously, the administration delayed for one year a requirement that small businesses in the program offer a wide variety of insurance options to their employees.

While they criticized the delays, Republicans also said the real problems would arise if the law is fully implemented.

"We are seeing a roll-out marred by missed deadlines and incomplete programs, but the real harm to patients, doctors, and taxpayers will result from a fully operational Obamacare," said Issa in a statement.

By Rebecca Adams, CQ HealthBeat Associate Editor

June 19, 2013 -- A strong majority of 18-to-30-year olds—a group whose willingness to buy insurance is central to the success of the new health law exchanges—says that coverage is "very important" and "worth the money it costs," according to a new survey by the nonpartisan Kaiser Family Foundation.

About 77 percent of those who are 18 to 25 and 71 percent of people 26 to 30 call coverage very important. About 76 percent of the 18-to-25-year-olds and 65 percent of 26-to-30-year-olds say insurance is worth the money.

Among the 18-to-64-year-old surveyed who were uninsured, 40 percent said that the high cost of insurance is the main reason why they aren't covered now. Only 11 percent said they don't need insurance.

The survey also found that 49 percent of adults said that someone in their household would be considered to have a pre-existing condition.

The overall opinions about the health care law (PL 111-148, PL 111-152) remain somewhat negative, with 43 percent saying they have an unfavorable view, 35 percent saying they favor the law, and 23 percent undecided. Support for the overhaul hit a high mark of 50 percent in the Kaiser polls in the summer after the law passed in 2010, and has never gotten above a 45-percent level of approval since then. Of those who have a negative opinion, 33 percent say the law goes too far while 8 percent said it doesn't go far enough and another 2 percent did not give a reason.

The public's understanding of the law remains weak, which is a cause for concern among advocates four months before open enrollment in the exchanges begins on Oct. 1. About 22 percent of respondents said they've heard at least "some" about the health insurance marketplaces for individuals and small businesses.

Among the groups that the law is most designed to help, the knowledge is even less. About 20 percent of lower-income Americans and only 12 percent of the uninsured say they have heard more than a little about the health insurance marketplace so far.

The survey was done in English and Spanish from June 4 through June 9, among a random land line and cell phone sample of 1,505 adults ages 18 and older. The margin of sampling error for the full sample is plus or minus 3 percentage points.

• Kaiser poll (pdf)