By John Reichard, CQ HealthBeat Editor

March 22, 2013 -- A long-pursued goal of lawmakers from parts of the United States with high-quality, low-cost care—that their providers be rewarded with higher Medicare payments—got no support from a recently released Institute of Medicine (IOM) report.

"Providing higher Medicare payment rates to hospitals and clinicians in regions of the country characterized by good health outcomes and relatively lower spending and decreasing payment rates in regions with overall lesser quality and higher spending would not give providers the incentive to delivery care more efficiently," the Institute said in a news release summarizing the findings of an IOM committee that prepared the report. The report is an interim one, with the final version due out this summer.

Members of Congress from those regions with the high-quality, low-cost care, which include the upper Midwest and the Pacific Northwest, first asked the IOM to do the report in 2009.

Geographic spending variations in the Medicare program have captured the attention of Congress ever since Dartmouth researchers found that Medicare spending and quality varied geographically. Health care spending and utilization rates varied widely by region, but did not appear to be consistently related to health outcomes or patient satisfaction, the Institute noted in the interim report, citing Dartmouth data.

"Seeking strategies to reduce costs, policymakers naturally wondered whether cutting payment rates to higher-cost areas would save money without adversely affecting health quality for Medicare beneficiaries," the report said. It further noted that according to a 2002 study by Dartmouth researcher John Wennberg, Medicare spending would drop by as much as 29 percent if practices of low-cost, high-quality regions were adopted nationwide.

Moreover, some lawmakers from high-quality, low-cost areas argue that highly efficient hospitals are penalized under the current payment system, the report also observed. Based on these observations, some policymakers believe that adjusting payments geographically could be a way to encourage all providers coordinate care in a region and improve their efficiency.

But the study said that decisions about care are made provider by provider, and not on a regional level. Providers within regions do not spend consistently on care or routinely deliver the same quality of care. So "using a geographically based value index to set Medicare reimbursements would reward underperforming providers in some regions and penalize those achieving good outcomes at lower cost in other areas," the report concluded.

The report also found that much of the geographical variation in Medicare spending relates to differences in spending on post-acute care. And the magnitude of spending on post-acute care in some areas—such as parts of Florida—raises concerns about fraud, it said.

If the IOM's findings disappointed Wisconsin Democratic Rep. Ron Kind, it wasn't apparent from his statement. He called the report "another important step forward in moving toward a more quality- and value-based health care delivery system. The report clearly indicates there is substantial geographic variation throughout the U.S. and within our local communities, and builds on another recent IOM study that found $750 billion in wasteful spending in the health care system each year," Kind said

"Today's report demonstrates the need to continue building on the payment and delivery system reforms included in the Affordable Care Act," he added. "Substantial savings are possible if we better incentivize hospitals, physicians, and physician groups to provide high-value care whether through a value modifier or other delivery system reforms."

By CQ Staff

March 22, 2013 -- A Commonwealth Fund report issued last week said that health insurance companies spent an average of $29 per plan enrollee on direct quality improvements in 2011.

The report by Mark Hall of Wake Forest University and Michael McCue of Virginia Commonwealth University said that amounted to less than 1 percent of the premiums that were collected from policyholders.

The health care law pushes insurers to spend less on administrative expenses and profits and more on activities that directly benefit consumers. Under the law (PL 111-148, PL 111-152), large insurers must spend at least 85 percent of the premiums they collect on medical claims and quality improvements or else pay rebates to their customers. Small insurers must spend at least 80 percent.

Quality improvement is defined as improving health outcomes, preventing hospital readmissions, improving patient safety and reducing medical errors.

The report found that there was a range in such expenditures, with some insurers devoting $40 per plan enrollee to quality improvement and some as little as $12.

"These data can provide insurers with helpful insights into how the industry is approaching quality improvement," said Sara Collins, a Commonwealth Fund vice president, in a statement. "The hope is that insurers will take the information and use it to determine if they are making an appropriate investment in improving quality and, ultimately, their members' health and well-being."

Data for the Commonwealth Fund study was obtained from forms filed by insurers with the Centers for Medicare and Medicaid Services.

By John Reichard, CQ HealthBeat Editor

March 18, 2013 -- Top Health and Human Services (HHS) official Michael Hash told reporters last week that the Obama administration is not only interested in talking to states about using federal Medicaid expansion funds to buy private coverage but, in fact, is "anxious" to do so.

"We're anxious to talk about this with any state that has an interest," Hash, director of the Office of Health Reform, said in a telephone press briefing that HHS held to trumpet the accomplishments of the health care law (Pl 111-148, PL 111-152) as it approaches its third anniversary, which is on March 23. But federal officials do not yet have a proposal on that type of Medicaid expansion to which they can respond, he said.

Hash said states are talking to HHS about using federal Medicaid expansion funds under the health care law to buy private coverage for uninsured residents. But the conversations have been informal so far. "To my knowledge, we do not have a formal proposal," he said.

States appear to be specifically interested in having those eligible for the expanded Medicaid program under the law use federal dollars to buy private coverage on insurance exchanges without having to meet current Medicaid regulations.

In Florida, GOP state Sen. Joe Negron is working on what he calls a "Florida solution," under which the state would buy private insurance policies with expansion funds, according to the Miami Herald.

The approach could be to allow adults to be covered in the Florida Healthy Kids program, the state's public-private program for low-income children, lawmakers said.

Arkansas officials are considering something similar. Gov. Mike Beebe, a Democrat, has said that HHS Secretary Kathleen Sebelius has told him that Medicaid expansion funds could be used to place low-income citizens in private insurance plans.

Florida Senate President Don Gaetz, a Republican, said in a written statement that the House and Senate will work together to explore how to provide private health insurance options for low-income people and replace the Medicaid program.

By Rebecca Adams, CQ HealthBeat Associate Editor

March 18, 2013 -- The federal government will soon give insurance agents and brokers details on the role they will play in the operation of the health care law's new marketplaces, officials overseeing the exchange implementation said on a recent national call with stakeholders.

"We very much look forward to participation by agents and brokers," both to assist individuals and small businesses, said Center for Consumer Information and Insurance Oversight (CIIO) Director Gary Cohen. He said that federal officials had a phone call last week with trade organizations representing agents and brokers to work through details about implementation and that he expects a guidance document with further information to be released "soon."

Cohen spoke on a national public call to provide information to stakeholders about implementation. He was joined by Center for Medicaid and Children's Health Insurance Program Services Director Cindy Mann. The wide-ranging call also addressed upcoming deadlines, planned efforts to reach out to potential enrollees, information on standalone dental plans and progress so far on implementation.

Several questioners asked about the role of agents and brokers as well as the role of navigators and assisters.

The officials said that training for navigators and other people who will assist potential beneficiaries with enrollment will begin in June.

On March 11, a proposed rule on navigators was sent to the Office of Management and Budget for final review before release. The OMB website showed that the proposal is still under review.

On the call, Cohen also indicated that an announcement of grants available for the navigator program could be out "in a couple of weeks."
He said the role navigators will play "really is a different function" than that played by agents and brokers.

Explaining the Navigators

Navigators will be required to have training and be certified to help people planning to get insurance through the exchanges. But navigators would not be expected to have broker licenses. They will provide information to consumers on the range of options available to them and what types of premium assistance they may be entitled to, but not "recommend or sell them into any particular plan" as an agent would, Cohen said.

One caller asked how agents will get paid.

"Our expectation is agents will be paid by commissions from issuers from whom they enroll people into coverage," said Cohen.

He said that CCIIO plans to rely on state licensing procedures for agents and brokers rather than attempt to duplicate that on the federal level.

Officials walked through a short timeline of the next steps in implementation. A national call center for consumers, available 24 hours a day, will launch in June. That month, the website healthcare.gov also will be revamped to give people information about the upcoming enrollment period, which goes from October to March. The website will later be updated again so that consumers can look at coverage options in September.

Officials hope to provide consumer outreach information in English and in Spanish. They also are studying what additional languages they should translate materials into.

Paid ads will be out during the open enrollment period to draw the public's attention to the new coverage options.

Cohen also said that the deadline for information from standalone dental plans will be after the deadline for other plans, which is April 30. Cohen declined to give a specific date. Last week, another CCIIO official said that May 15 will probably be the deadline.

In an overview of the program, Cohen said that federal officials are working hard to "make sure there are products on shelves for people to buy beginning in October."

• CMS information

By Jane Norman, CQ HealthBeat Associate Editor

March 20, 2013 -- A new federal commission on long-term care faces the formidable task of coming up with workable ideas that also stand a chance of making it from concept into law within five years, a member of the group recently said.

"We have a five-year window to do something substantial," said Bruce Chernof, president and CEO of the SCAN Foundation, which organized a conference on options for transforming what Chernof called the "broken system" of long-term care. The foundation advocates for quality long-term care for seniors.

The five-year period is crucial because the baby boom generation is aging, and while many may not need care when they first retire, those circumstances will change, he said. The Department of Health and Human Services estimates that 70 percent of Americans will need long-term care at some point in their lives, yet there's no national strategy in place.

"As the boomers go through, if we are going to make a difference in their lives, five years is the break point," said Chernof. "What we're really talking about here is triaging the impact on Medicare and Medicaid, because Medicare and Medicaid will bear the brunt of our failure to act."

Medicaid pays for nursing home care for poor people, and Medicare picks up costs associated with doctor visits and hospital stays. Private long-term care insurance is available but few people buy it. Most of the time, long-term care is provided by an unpaid spouse, family member or friend, studies show.

President Barack Obama and Republican and Democratic leaders of Congress have appointed Chernof and 14 other commissioners to a temporary panel that will study how to provide long-term supports and services to seniors and people with disabilities. The commission, which was created in the fiscal cliff law (PL 112-240), is charged with making recommendations to Congress within the next six months.

At the Beginning

In an interview, Chernof said the commissioners are just now getting organized and don't yet have a date for a first meeting. Obama, the last to make appointments, did so a week ago. Chernof also said he's personally committed to making commission deliberations open to the public; similar panels like the Medicare Advisory Payment Commission also meet in public.

The group will convene amid what many experts view as a growing crisis in long-term care. A voluntary long-term care insurance program known as the CLASS Act was created in the health care law (PL 111-48, PL 111-152) but the Obama administration abandoned it when it was determined the program wasn't financially viable. Congress then repealed it. Plus there is little money available for launching a new system for care, and other groups have produced recommendations in the past that were never acted upon.

Chernof said he understands the skepticism that the commission will produce results. "Is there any reason to believe this time will be any different? I don't think we'll know the answer to that question until we go through the work ahead of us," he said. "While it's very hard, very hard for us to make change, I don't think it's impossible."

Other commissioners appointed by Democrats besides Chernof include Judy Feder, a professor of public policy at Georgetown University, and Carol Raphael, vice chairwoman of the AARP Board of Directors. Republican appointees include Grace-Marie Turner, president of the Galen Institute, a right-leaning think tank; and Bruce Greenstein, secretary of the Louisiana Department of Health and Hospitals.

Fresh Research

The conference featured the presentation of summaries of research papers on the current landscape of financing of long-term care as well as policy considerations for the future. Among them:

• Jeremy Pincus, of the Forbes Consulting Group, said that most workers don't have access to private long-term care insurance through their employers, which decreases the possibility they will buy it. Pincus said that 61 percent of employers sponsor health insurance for their workers, but just 0.3 percent sponsor long-term care insurance. He said there is an "enormous untapped market" for long-term care insurance.
• Joshua M. Wiener, who studies health and aging issues for RTI International, looked at the characteristics of people over 50 who between 1996 and 2008 "spent down" all their money and thus qualified for Medicaid coverage. He said his findings contradicted the impression that Medicaid is a "middle class entitlement," and instead found that most of those who became eligible didn't have much money throughout their lives. Those who spend down to Medicaid eligibility tend to be black, Hispanic, unmarried and with lower levels of education, Wiener said.
• Anne Tumlinson of the consultants Avalere Health said that a voluntary system for long-term care insurance wouldn't reach a substantial portion of the population or significantly reduce the number of people who depend on Medicaid to pay for nursing home costs. Tumlinson said that a mandatory program by its 15th year would cover 86.7 million people, save Medicaid $49 billion and cost enrollees $35.26 monthly in its first year. A voluntary program would cover just 8.4 million people in its 15th year and save Medicaid $5.6 billion, she said.

• SCAN Foundation Papers (PDF)

By Emily Ethridge, CQ Roll Call

March 21, 2013 -- The Food and Drug Administration (FDA) will not regulate smartphones, tablets, and most mobile health applications and is not inclined to put the items in a category that would subject them to a tax, an agency official told lawmakers.

House Energy and Commerce Republicans devoted three days this week to hearings looking into FDA regulation of mobile medical applications, and whether those items could be subject to a medical device tax in the 2010 health care law (PL 111-148, PL 111-152).

GOP lawmakers and some industry officials said a lack of final guidance from the FDA made uncertain how the apps—which can range from calorie counters to devices that turn phones into ultrasound machines—would be regulated.

"The message was clear: We need final guidance. The developers of these apps and the health care industry need certainty," Oversight and Investigations Subcommittee Chairman Tim Murphy, R-Pa., said at the hearing.

Christy Foreman, director of the Office of Device Evaluation at the FDA's Center for Devices and Radiological Health, tried to reassure lawmakers that the agency intends to regulate only a narrow subset of mobile medical applications.

Those applications must meet the definition of "device" under FDA law, and either serve as an accessory to an already-regulated medical device or turn a mobile platform into a regulated device. She also said the agency's policy would not involve regulation of smartphones or other platforms for mobile medical apps.

"It would not regulate the sale or general consumer use of smartphones or tablets," Foreman said.

Foreman said the FDA would concentrate on regulating applications that could pose a risk to patient safety if they do not work as intended. That means the agency would not focus on products meant to guide someone on a healthy lifestyle, such as pedometers or calorie counters.

In addition, products not intended to diagnose a disease or condition, or to cure, mitigate, treat or prevent a disease are not considered medical devices, the FDA says.

"We intend to strike the right balance," Foreman said. "We are actually refining our regulatory approach, rather than overreaching."

The final guidance on regulation of the apps will come out by the end of this fiscal year, Foreman added. A draft guidance, released July 2011, caused much consternation in the industry. An FDA user fee law (PL 112-144) enacted last year required the Health and Human Services Department to collaborate with other agencies and post a proposed regulation strategy online.

Several Republicans asked whether the FDA regulation of the mobile apps could lead to apps or smartphones being taxed as medical devices under the health care overhaul. Republicans say the medical device tax will hurt innovation by preventing companies from investing in new products.

"This isn't about scaring people into thinking this tax will apply to their iPhones, Blackberries or iPads, but this tax could absolutely halt the development of new apps to run on those devices," Murphy said.

Foreman noted several times that the IRS, not the FDA, has control over implementing tax policy. But she said the agency did not intend to list smartphones as medical devices.

"They would not be regulated as medical devices, therefore not subject to the medical device tax," Foreman said.

Democrats chided Republicans for pursuing the question at hearings over the past three days. Henry A. Waxman, D-Calif., noted that the health care law says that any devices generally bought by the general public at retail for personal use are exempt from the tax.

"Thank goodness the myth of the iPhone tax has now been put to rest," said subcommittee ranking Democrat Diana DeGette of Colorado.

Foreman also addressed concerns that the FDA is hindering industry by taking too long to review submissions for medical mobile apps.

"This is not new for the FDA. We've been regulating software and mobile apps for some time," Foreman said.

According to a letter the agency sent to committee members, the average time in 2011 and 2012 for FDA review of medical device submissions with a mobile medical app was 67 days. The average total time from submission until an FDA decision was 110 days.

Foreman added that the FDA gets fewer than 20 submissions a year with mobile medical apps—about 0.5 percent of all medical device applications it reviews.