By John Reichard, CQ HealthBeat Editor

May 23, 2013 -- The Obama administration recently got a respite from the rising chorus of inside-the-Beltway doubts about the health care law with news from California that its insurance exchange will offer residents in the individual market 13 plans at what officials said are affordable rates.

The plans available for small businesses will be announced in June.

Successful implementation of the law in the state could go a long way toward fostering national efforts to accomplish the overhaul. Coverage of the state's large uninsured population would significantly dent the national total of people without health benefits. It would also show other states a path toward putting the provisions of the overhaul into effect.

On the other hand, had the exchange effort fizzled in California, it would have cast a pall over national implementation efforts given all the resources the state was bringing to bear on meeting the challenge.

Arguably, if the health care law can't make it in California, it's unclear whether it can anywhere. The state has mounted an aggressive effort to set up its own insurance marketplace, called Covered California. It has the resources for a big education and assistance campaign this summer to educate people about the law and help them enroll in plans.

And it has health plans regarded nationally as models for delivering cost-effective care, including Kaiser Permanente and Sharp Health Plan.

And, based on comments by insurance and other officials at a news briefing in Sacramento, it has cooperative doctors and hospitals willing to accept lower payment rates in order to help keep premiums affordable and to help make the coverage expansion work.

Early news about insurer participation focused on the fact that such big insurers as Aetna, Cigna, and United HealthGroup would not be offering plans in the exchange.

But other insurers and health plans have a major presence in the Golden State. And enough insurers are taking part to allow a choice of a half-dozen plans in such major markets as Los Angeles and San Diego and at least two or three plans in all regions of the state, officials said.

"This is about 5 million Californians that want and need health care that we're going to be able to provide through the Affordable Care Act," Peter V. Lee, director of the exchange, told reporters.

"Across the nation, we've heard the doom-and-gloom predictions that the Affordable Care Act would lead to staggering premium increases," he said. "The big news today is that because of the Affordable Care Act, we hit a home run for consumers. We have affordable rates. We have better coverage, and real choice for consumers across the state."

Officials Short on Specifics

Lee is a respected figure in health care purchasing circles who for years led the influential Pacific Business Group on Health. But the money question is, what does "affordable" mean? Here Lee had a more difficult case to make. He said it wasn't possible to cite a single figure to cement his argument because there is so much variability in how much any one person now pays in the individual market.

But Blue Shield of California CEO Paul Markovich suggested that enrollees with individual coverage from his company this year would pay 13 percent more next year.

"Rates are going to go up for some," Lee did say. He noted that increases forecast by the Milliman consulting company for California were considerably higher, 29 percent on average. "We're hitting best-case numbers," Lee said. He added that the state wanted "Goldilocks" pricing—not so high as to be affordable, but high enough to make sure patients can get the care they need.

While some consumers will have a choice of only two or three plans, Lee emphasized that rates will be affordable, suggesting in part that that is the case because California's exchange is one of the few in the nation that will be "active purchasers." In other words, the exchange has the power to exclude an insurer if it doesn't offer a good deal.

Thirty-three plans initially said they intended to bid, he said. "We didn't just say, 'Come one, come all.' Quite frankly, we've held insurers' feet to the fire," and some dropped out of consideration, he said.

Another unusual feature of the California exchange is that benefits offered by the plans are standardized. In other words, all plans offer the same benefits, which puts more pressure on them to compete on factors such as cost, quality, efficiency, and the strength of their provider networks.

Among the participants is a plan that straddles the Medicaid and exchange markets, which means that as income levels fluctuate—such as if a person loses income and has to go on Medicaid—he or she can stay in the same health plan with the same network of providers.

"The rates submitted to Covered California for the 2014 individual market ranged from two percent above to 29 percent below the 2013 average premium for small employer plans in California's most populous regions," the exchange said in a news release.

"This is impressive since the 2014 products include doctor visits, prescriptions, hospital stays and more essential benefits; protecting consumers from the 'gimmicks and gotchas' of many insurance policies."

Betsy Imholz, special projects director for Consumers Union, praised the exchange offerings. "The days of paying premiums and hoping your insurance will cover you if you get sick are coming to an end," she said in a new release. "These rates will cover you for pre-existing conditions, chronic conditions and acute care. Covered California is bringing health and financial security to our families."

Colorado, another state that has set up its own exchange, also announced this week that it would have an array of choices to offer consumers. But states are expected to widely vary in the number of plans offered by exchanges in line with levels of insurance participation in their current markets.

By Rebecca Adams, CQ HealthBeat Associate Editor

May 22, 2013 -- More than half of all doctors now get Medicare or Medicaid incentive payments for using electronic health records, according to a report federal officials released last week. But Republicans say medical professionals should not just use the records in their own offices but also should exchange them with other providers.

Republican lawmakers, backed by a business and insurance company alliance known as the Health IT Now Coalition, have been pushing the Department of Health and Human Services (HHS) in recent months to end Medicare and Medicaid IT bonus payments for providers who do not share electronic medical data with other providers.

The response from HHS officials has been to point to the progress that has been made since the Medicare and Medicaid incentive payments for providers that adopt electronic records was included in the 2009 stimulus law (PL 111-5).

The recent report noted that HHS has exceeded its goal of having half of physicians' offices and 80 percent of eligible hospitals using electronic health records by the end of 2013.

HHS officials showed charts indicating how the use of medical records has grown: The percentage of physicians and other medical professionals using an electronic health system was 17 percent in 2008 and is currently about 55 percent.

For hospitals, about 9 percent used electronic records in 2008, but more than 80 percent have established and used electronic records.
As a result, more than 291,000 eligible professionals and more than 3,800 eligible hospitals have gotten incentive payments from Medicare and Medicaid.

Doctors have received a total of nearly $6 billion, while hospitals have received almost $9 billion.

But Republicans say that some of that money may have been wasted or unnecessary. Six senators produced a 27-page report criticizing the program and demanding more oversight. Those senators are John Thune of South Dakota, Lamar Alexander of Tennessee, Pat Roberts of Kansas, Richard M. Burr of North Carolina, Tom Coburn of Oklahoma and Michael B. Enzi of Wyoming.

By Rebecca Adams, CQ HealthBeat Associate Editor

May 20, 2013 --Medicaid officials are suggesting five ways for state officials to simplify their eligibility procedures as they transition from current standards to new rules required by the health care law.

The Centers for Medicare and Medicaid Services (CMS) suggested the optional techniques in a 12-page guidance letter to state Medicaid directors issued late last week. The goal is to ease the administrative burden on states facing a huge task this fall as they shift to a new Medicaid system under the health care law (PL 111-148, PL 111-152).

On Oct. 1, all states, whether or not they are expanding their Medicaid programs, have to start using different income criteria to determine eligibility for new recipients because the overhaul law requires the uniform use of modified adjusted gross income, known as MAGI. As state officials are shifting to this new eligibility process, they are expecting an onslaught of new Medicaid applications for coverage that will take effect in January. At the same time, officials will be running new applications through the existing eligibility system to see whether applicants might already qualify for Medicaid and their benefits could begin before Jan. 1.

Federal officials said they are suggesting ways to simplify the process. For example, one goal is to avoid making state officials do two different eligibility tests for the same applicant during the transition. States that want to pursue any of the proposed techniques would have to get formal permission from CMS through a waiver, but the letter makes clear that federal officials are eager to approve those requests. CMS will provide sample language that states can use for a waiver request.

"States are encouraged to consider implementing any or all of the following strategies and also to suggest other strategies to CMS," said the letter, signed by CMS Deputy Administrator Cindy Mann.

The five ideas would encourage states to change the system by:

• Acting earlier to start using MAGI standards. Instead of implementing the new income standards for coverage beginning on Jan. 1, states could use it for Medicaid coverage as of Oct. 1. That would eliminate the need to run applications through two eligibility screens.
• Delaying the renewal dates of people who are already enrolled in Medicaid. CMS officials suggest waiting until March 31, 2014, to check the eligibility of any beneficiary whose coverage is up for renewal in the first quarter of the year. The reason is that the health care law had a provision intended to protect current Medicaid recipients. That provision says no one can be kicked out of the program because of the new MAGI methodology until at least March 31. That clause would mean that states would have to run the numbers two different ways, using both the 2013 methodology and the new MAGI formula, to anyone whose renewal date falls between Jan. 1 and March 31, 2014. If states choose to wait until the end of March to process renewals, they would only have to use the new MAGI methodology.
• Enrolling people who are eligible for food stamps under the Supplemental Nutrition Assistance Program into Medicaid in 2014 and 2015. Most SNAP recipients would be eligible for Medicaid because the income of food stamp beneficiaries cannot be more than 130 percent of the federal poverty level. Many states might find it easier to enroll food stamp recipients than to check the MAGI for all of those beneficiaries.
• Enrolling parents into Medicaid based on their children's eligibility.
• Using a continuous 12-month eligibility period for adults. "For states, the option can mitigate the problems associated with 'churning,' the enrollment and re-enrollment of eligible people when they lose coverage due to procedural reasons or slight fluctuations in income," the memo said. Many states already use continuous eligibility in their Medicaid or CHIP programs for kids. The memo said that 32 states have used 12-month continuous eligibility in their Medicaid or CHIP programs for children, with 23 states implementing it for both programs.

By Rebecca Adams, CQ HealthBeat Associate Editor

May 23, 2013 -- Children's consumer advocacy groups and health industry professionals are watching to see what a final Medicaid rule that will soon be released will say about changes to patient costs.

The final rule is one of a half dozen Centers for Medicare and Medicaid Services (CMS) regulations that are at the Office of Management and Budget (OMB) for a final review before being released.

The proposed regulation, which was released in January, is a grab bag of many Medicaid-related changes. It affects appeals; the coordination between Medicaid and the new health care law marketplaces; eligibility verification, including immigration status of applicants; and how hospitals can start signing up uninsured patients for Medicaid. The rule also includes changes to the Children's Health Insurance Program.

One difference in the proposed rule from current law would allow states to levy higher out-of-pocket charges on Medicaid patients.

The changes, if finalized, would affect people who are already on or eligible for Medicaid as well as those who can enroll next year if their state expands eligibility. The health care law (PL 111-148, PL 111-152) allows states to expand Medicaid for those earning up to 138 percent of the federal poverty level.

The proposed rule suggests higher cost sharing for some services, including prescription drugs and non-urgent use of the emergency department.

Stakeholders Want Changes

CMS officials are getting pressure from hospitals and advocates to ease the proposed increases.

The American Hospital Association (AHA) agreed that inappropriate use of emergency departments is a problem, noting that visits to the emergency department by Medicaid and uninsured patients grew by 42 percent from 2004 to 2009, compared with a 23 percent increase among all patients. But the group wrote that imposing higher cost sharing "poses challenges for hospitals."

"For hospitals, the collection of Medicaid cost-sharing amounts for non-emergency care in ED [emergency department] settings can prove difficult, leading to lack of payment and increases in bad debt," said the association's letter, signed by AHA Executive Vice President Rick Pollack.

Patient advocates also are prodding the agency to keep cost sharing low.

"Maternal and child health advocates are alarmed at the proposed cost-sharing changes to the Medicaid program," said a letter from advocacy groups including the American Academy of Pediatrics, the American Congress of Obstetricians and Gynecologists, and the March of Dimes. The groups said higher cost sharing could result in untreated problems that become more severe and "lead to downstream costs to the health system."

Under current law, emergency department costs are supposed to be "nominal" for people with incomes at the poverty level (which this year is $11,490) or less. That means no more than $3.90 per visit in fiscal 2013. Under the proposed rule, the new maximum amount would more than double, to $8.

The amount for emergency care that could be charged to people with incomes more than 150 percent of the poverty level would stay the same, with a limit of 5 percent of the family's income.

However, the rule also puts new restrictions on when hospitals could impose cost sharing for non-urgent emergency department visits. Those new requirements say, for instance, that the hospital has to give the patient the name and location of another provider and ensure that the other provider can serve the patient in a timely manner with lower cost sharing.

Those types of rules leave hospital officials scratching their heads about how they will know whether providers can see them.

For drugs, the caps on patients' costs would increase to $4 for preferred drugs such as generics and $8 for non-preferred medicines for people with incomes at or less than 150 percent of the poverty line. Low-income people who earn more than that could be charged up to 20 percent of the drug cost for non-preferred drugs.

For outpatient care, the cost sharing under current law is tied to what the agency pays for the service. For fiscal 2013, states can charge from $1.30 and up to $3.90.

CMS officials proposed changing that to a flat $4 maximum charge for outpatient care for people with incomes below the federal poverty level or less. "We believe a flat $4 cost-sharing maximum is reasonable," said the proposed rule. For people with incomes at or above the poverty level for outpatient care, states would be able to continue charging higher cost sharing.

For inpatient care, Medicaid officials also said they are trying to decide how to cap patient costs. Options include limiting copays to $4, $50 or $100 per visit. Currently, the cost sharing that states require of Medicaid patients varies significantly, with many states charging nothing or minimal amounts, according to statistics by the Kaiser Commission on Medicaid and the Uninsured. Some states, however, require copays of up to $200.

The New York City Department of Health and Mental Hygiene is another critic of increased cost sharing.

"The department is concerned that some beneficiaries would go without needed care due to inability to pay (or a fear or incurring) cost shares, potentially resulting in subsequent negative (and expensive) health" conditions, the agency wrote.

"There has been an extensive body of research indicating that when low-income families face higher cost sharing and premium charges, enrollment and the use of necessary services decreases," the Georgetown University Center for Children and Families chimed in, noting that the rule mentions this research. "It is disappointing that these proposed rules offer states the option to impose higher cost sharing on low-income families. More effective and targeted strategies, such as turning to disease management programs or ensuring that all Medicaid beneficiaries have a primary care provider who helps them manage and coordinate their health care, would serve the goals of the program better than cost sharing."

Also at OMB

Other health-care-law-related rules getting a final review at OMB include:

• A final regulation that for the first time sets standards for health and safety at community mental health centers that serve Medicare beneficiaries. The proposed rule was issued on June 16, 2011. Under the proposed rule, the centers would be required to establish qualifications for employees and contractors; notify clients of their rights and investigate and report rights violations; convene treatment teams that would develop treatment plans and coordinate services; create quality programs; and more.
• A final rule that would set up a transition plan for the so-called SHOP exchanges. In an effort to make the shift to the new program smoother, the CMS proposal would delay an "employee choice" model as a requirement for SHOPs in federally run exchanges. That means small employers would have to offer only one qualified health plan to workers in the exchanges.
• Two other rules address eligibility requirements for exemptions in the exchanges, as well as additional program implementation guidelines.

By Rebecca Adams, CQ HealthBeat Associate Editor

May 21, 2013 -- Virginia recently became the sixth state approved to participate in a national three-year demonstration to better coordinate care for people eligible for Medicare and Medicaid.

The Centers for Medicare and Medicaid Services (CMS) announced that about 78,600 Medicare-Medicaid beneficiaries in five regions of Virginia will be enrolled in managed-care plans when the demonstration begins in 2014.

Health plans are supposed to allow patients to continue to see their physicians as they transition into the program, which will be known in Virginia as Commonwealth Coordinated Care. The plans will oversee beneficiaries' primary care, preventive services, acute care, mental-health and long-term-care services.

The state expects to save about $11.3 million in Medicaid funding in the first year, Gov. Bob McDonnell said in a press release, citing preliminary budget estimates. That estimate may change somewhat when it is updated in the next budget cycle because the projections were done before negotiations with CMS over rates and over the way that the state and federal governments will share savings were completed.

"Some of Virginia's most vulnerable adults will now benefit from a program where their health care and long-term services and supports are better coordinated," McDonnell said in the statement. "This enhanced care model will improve and sustain the health of beneficiaries while allowing the state and federal government to realize cost savings as a result of increased care management."

The effort will be phased in, with the initiative starting first in February in the Central Virginia and Tidewater regions of the commonwealth, according to a CMS fact sheet.

Individuals will first be able to opt in to the program. Beneficiaries who do not make a choice about whether or not to join the program will then be enrolled through a process that is designed to match beneficiaries with the most appropriate plan for the individual's medical needs. Patients will be able to opt out of the initiative or switch plans at any time, CMS officials said.

"We look forward to working with the commonwealth to provide these beneficiaries with more coordinated, person-centered care," said Melanie Bella, director of the CMS Medicare-Medicaid Coordination Office.

Demonstration Scaled Back

So far, the five other states that have been approved are Massachusetts, Washington, Ohio, Illinois and California. One—Washington—will test out new models of managed fee-for-service, while the others will use health plans that receive capitated payments.

Soon after the demonstration projects were announced in 2011, some skeptics were concerned that the projects would move too quickly and involve too many people. Now, as the pace of the effort has moderated, the worries about whether the pilot was moving too fast have faded somewhat.

However, some lawmakers, such as Sen. Jay Rockefeller, D-W.Va., are still watching the program closely and want the demonstrations to test different models with small groups of beneficiaries before enrolling large populations.

"My concern is that we get it right—and use the demonstrations to teach us how to achieve the 'dual' goals of saving money and improving care," Rockefeller said in a statement to CQ HealthBeat. "It's not clear to me that Medicaid managed care organizations are the way to go. I'd like to see some of the demonstrations move duals fully into Medicare, and I think it's essential that we test different models with smaller populations, rather than experimenting too broadly too quickly. Seniors' health care is at stake here."

The announcement of Virginia's approval comes after a few of the 26 states that originally applied to participate dropped out or significantly altered their proposals. Arizona was the latest, sending an April 10 letter to Bella saying that the state wanted to withdraw its proposal to join the initiative.

The letter from Thomas J. Betlach, the director of the Arizona Health Care Cost Containment System, outlined a half-dozen challenges specific to the state, including the fact that Arizona is in the midst of two big initiatives involving managed-care plans this year. He also mentioned the structure of the current health plan system for dually eligible patients in Arizona as posing a challenge and noted that mental-health services are not yet integrated for some beneficiaries in the current system. In addition, he said that "significant political and operational challenges are involved" with implementing the health care law (PL 111-148, PL 111-152).

"In our decision-making process, we have had to weigh the impact of these challenges in combination with the significant Arizona related risks associated with the demonstration," wrote Betlach. "As we have previously highlighted, some of the risks for Arizona include: the implementation start date; the path forward after the three-year demonstration; and the issues surrounding capitation rates and supplemental benefits."

California also announced earlier this month that it would delay the start of its launch for three months until January 2014.

Tennessee and New Mexico have also withdrawn their applications to participate. And Hawaii told CMS officials that it would not be ready until 2015, which would probably be too late to participate in the initiative.

A few other states have reoriented their proposals. New York initially wanted to try out two different models, a capitated system and a managed fee-for-service model, but it has decided to stop pursuing the fee-for-service component. Two other states, Oregon and Minnesota, are working with CMS on other similar initiatives.

The roughly 9 million people who are dually eligible for Medicare and Medicaid consume about $300 billion per year in medical spending. They are typically among the frailest patients in the U.S. health care system.

By John Reichard, CQ HealthBeat Editor

May 22, 2013 -- The question of whether the health care law is spurring an increase in part-time work needs to take into account that such a trend was already under way, a new report by the Employee Benefits Research Institute (EBRI) states.

"The recent recession has already resulted in an increased use of part-time workers," notes the analysis by the nonpartisan institute.

The percentage of workers employed part-time has been rising since 2007, increasing from 16.7 percent in that year to 22.2 percent in 2011, the EBRI report said.

The health care law (PL 111-148, PL 111-152) requires that, starting in 2014, employers with 50 or more full-time workers pay a penalty if they do not offer health coverage to those employees. The law does not require health coverage for part-time workers, who are defined as people working fewer than 30 hours a week.

There are reports that some employers are increasing the number of part-time workers they employ in order to avoid having to provide so much health coverage when the insurance mandate begins in 2014. In a recent interview, EBRI analyst Paul Fronstin stopped short of saying that such a trend is under way because of the health care law, but he acknowledged the possibility.

EBRI's new report notes that resolving that question requires taking into account that the switch to part-time work had already started.

Possible Health Care Law Impact

Almost all employers with 50 or more full-time workers offer health coverage. But there are other provisions of the health care law "that are expected to increase the cost of coverage," the report says. "As a result, there is concern that employers may respond by cutting back on health coverage for part-time workers or by increasing the proportion of part-time workers employed," it adds.

That already seems to be happening. Employers are using more part-time workers and are less likely to offer them health benefits. In 2011, 59.6 percent of full-time workers had coverage from their jobs, while 15.7 percent of part-time employees had health benefits. "Both have been trending downward since 2007," the report said. "However, in relative terms, part-time workers have experienced a much larger decline in coverage than full-time workers. Between 2007 and 2011, full-time workers experienced a 2.8 percent reduction in the likelihood of having coverage from their own jobs, while part-time workers experienced a 15.7 percent decline."

Fronstin said that since there is much debate about how the health care law might affect employment, these recent trends provide an important baseline against which to measure the impact of the overhaul.