July 28, 2014 -- Medicare spending remains low by historical measures, prompting program trustees to project that the hospital inpatient trust fund will be depleted in 2030, four years later than projected last year. The new estimate released today matches one by the Congressional Budget Office released earlier this month.

The Part A trust fund is a partial measure of the health of the health program for the elderly and disabled. Other components, such as the Part B outpatient program, also have a stronger financial outlook than last year.

As a result, seniors' Part B premiums for doctor office visits and outpatient care will be unchanged in 2015, at $104.90. The rates were first set at that amount in 2013.

The trustees also forecast lower prescription drug spending than last year because of lower projected costs and higher drug rebates under Medicare's Part D drug program.

Over the next five years, the report anticipates that outpatient spending will grow at an average annual rate of 5.7 percent, compared to 6.2 percent over each of the last five years. Drug spending is anticipated to grow an average of 9.9 percent annually over the next five years, compared to 7.2 percent each year over the past five years. Inpatient hospital costs are expected to average 3.9 percent over the next five years and have averaged 2.5 percent annually over the last five years.

One difference in this year's report is that the projections assume that Congress will stave off a 20.8 percent cut to Medicare physician payments in April, when a short-term "doc fix" patch expires. That makes the estimates in this report a bit more useful than they have been in the past, said trustee Robert Reischauer, because trustees assume that physician payments would rise by 0.6 percent per year, or the annual average over the past decade.

Medicare's finances remain fundamentally secure in the years ahead, said Treasury Secretary Jacob J. Lew. However, he said that changes should be made to the program to ensure that funding will be able to cover expenses in the long term.

"We must make manageable changes now so we do not have to make drastic changes later," said Lew.

The program, which spent $583 billion in 2013, is fiscally unsustainable over the long run, said Reischauer. The sooner policymakers make changes, the less disruptive those changes will have to be.

Reischauer, trustee Charles Blahous and Health and Human Services Secretary Sylvia Mathews Burwell said that they cannot pinpoint precisely why Medicare spending has grown at a slower-than-expected rate in recent years.

Some potential factors include a weak economy, an increase in the burden placed on consumers' out-of-pocket costs outside of Medicare through high-deductible plans, greater restrictions on beneficiaries' choice of providers, higher use of drugs that could prevent hospitalization, greater pressure on providers to become efficient and prevent patients from undergoing hospitalization and changes in the health care law (PL 111-148, PL 111-152).

But determining which factor is most important and how long each will continue to hold down Medicare spending is not possible.

"No one knows and there is an active debate going on," said Blahous, adding that trustees are not going to settle the disagreements.

The slower growth means that an advisory panel known as the Independent Payment Advisory Board does not need to be directed to come up with recommendations for Congress to lower spending.

An administration official said that the trustees assumed that the lower growth trend is expected to continue for the near-term future.

The average per-person average cost for Medicare spending was $12,210 in 2013, compared to $12,209 in 2012.

August 1, 2014 -- Justice Department lawyers petitioned a federal appeals court late last week to overturn a July 22 ruling by a three-judge panel that declared health law subsidies to buy coverage are only lawful in states that have set up their own insurance exchanges.

The petition for rehearing en banc by the full U.S. Court of Appeals for the District of Columbia in Halbig v Burwell, if granted, would vacate the order by the panel that struck down an Internal Revenue Service rule authorizing subsidies in all 50 states plus the District of Columbia, said Washington and Lee University law school professor Timothy Jost.

The Obama administration could have taken longer before filing the petition. But Jost said it's in law supporters' interest to vacate the order as soon as possible and eliminate a split in circuit courts on the legality of subsidies in the 34 states that don't have their own exchanges and rely on the federal website healthcare. gov. On the same day the Halbig decision was handed down, the 4th Circuit Court of Appeals in Richmond, Va., ruled in King v Burwell that the subsidies are lawful in all states plus the District of Columbia.

Last week, the plaintiffs in the King case, represented by Michael Carvin of the Jones Day law firm in a challenge funded by the Competitive Enterprise Institute, petitioned the U.S. Supreme Court to review that case.

If the subsidies ultimately are struck down in healthcare.gov states, mandates in the health law (PL 111-148, PL 111-152) requiring individuals to have health insurance and certain employers to provide it to their workers would be wiped out in those areas unless they created their own exchanges, policy analysts say.
Consumer protections guaranteeing all applicants access to insurance in the individual market and barring insurers from charging them based on their medical histories would become unworkable, analysts add. The uninsurance rate would be far higher than it otherwise would.

The Justice Department petition for a rehearing en banc asserts "Congress intended an exchange to operate effectively in each state and gave each state a real choice whether to create that exchange itself; it did not deny tax credits to individuals who need them in states that opted to have HHS set up their exchanges."

"If I were them I would want to get the D.C. Circuit decision disposed of as quickly as possible because Carvin has filed for a cert petition and he can right now argue there's a circuit split," Jost said of the Justice Department attorneys. If the court grants en banc review, it will vacate the decision of the panel, he said.

"If that happens, there's no circuit split," Jost said. "The Supreme Court almost never grants cert in the absence of a circuit split of a decision upholding [a] federal rule."

By Melissa Attias, CQ Roll Call

July 31, 2014 -- A key Obama administration official told House lawmakers last week that there will be bumps in the road during the health law's forthcoming second open enrollment period for people to buy coverage but that the situation is "vastly different" from the rocky rollout last fall.

Andy Slavitt, principal deputy administrator at the Centers for Medicare and Medicaid Services (CMS), noted that the federal insurance exchange website is already up and running and that officials are making improvements in a much less risky manner with frequent releases over the course of the summer.

When the first open enrollment period began on Oct. 1, 2013, the website was plagued with problems that sparked fierce public scrutiny and backlash from opponents of the law.

Slavitt's comments before the House Energy and Commerce Oversight Subcommittee followed the release of a new report from the Government Accountability Office (GAO) that offered a critical look at the contracting for the federal exchange website.

William T. Woods, GAO's director of acquisition and sourcing management, said in his written testimony that CMS needs a risk mitigation plan to address outstanding issues.

"Unless CMS improves contract management and adheres to a structured governance process, significant risks remain that upcoming open enrollment periods could encounter challenges," he wrote.

Looking back to the first enrollment period, Woods confirmed during the hearing that the files his agency reviewed suggest that people within CMS knew the website would not work on Oct. 1, drawing concern from lawmakers from both parties. He said GAO found some indication that estimates from the spring of 2013 found that the federal exchange would only be 65 percent complete by the Oct. 1 deadline. But he said he did not have evidence that CMS Administrator Marilyn Tavenner or former agency official Gary Cohen knew the website would not work when they testified before the committee that it would be ready.

Slavitt was also asked about the inconsistencies in applications for coverage submitted through the federal exchange and how many people were affected. He estimated that a couple million people had inconsistent information, roughly half of which arose from income changes that will force recipients to go back to the website and make adjustments. Of the other half, he said federal officials have cleared 425,000 inconsistencies as of July 1 and that more 90 percent of those were in favor of the individual who had more updated information than the government.

Slavitt also said they're learning that some of the discrepancy problems are "a fact of life." But the change for next year, he added, is that the officials have software that allows them to address the inconsistencies faster.

Asked about premium rates for next year, Slavitt said the rate increases that are publicly available from some states thus far have been in the mid-single digits.
"While this isn't going to be true for every single individual in every single county in America, by and large the early results look positive–very positive," he said, also noting that there will be greater choice in the exchange than last year.

In addition, Slavitt said that, to the best of his knowledge, no one has successfully penetrated the security system for the federal exchange website.

In his prepared testimony for the second panel, Woods said GAO found that CMS "undertook the development of healthcare.gov and its related systems without effective planning or oversight practices, despite facing a number of challenges that increased both the level of risk and the need for effective oversight." CMS program and contracting officials said the process was aggravated by "compressed time frames and changing requirements," Woods wrote, with a desire to meet project deadlines affecting a number of decisions.

GAO also noted that the type of contract chosen for the federal exchange and the data hub is considered to be high risk because it could lead to higher costs and the certain payments are made whether or not the work is completed, which boosted the need for oversight.

The estimated costs for developing the federal exchange increased from a $56 million initial obligation to more than $209 million from September 2011 to February 2014, the agency said. The data hub costs also rose from a $30 million obligation to nearly $85 million.

The GAO additionally said that CMS moved a readiness assessment for the federal exchange from March to September 2013 without receiving required governance approvals. That meant that the agency launched the website without verifying that it met required performance metrics. And GAO found about 40 instances during the exchange's development where CMS staff authorized contractor requests to spend money for additional work without proper approval, totaling more than $30 million.

According to Woods' testimony, CMS detected significant performance problems with CGI Federal, the contractor for the federal exchange, as the Oct. 1 deadline approached. But the agency only took limited steps in response. In the end, CMS declined to turn over roughly $267,000 in requested fees, or about 2 percent of the $12.5 million paid to the contractor.

CMS then awarded a new contract to Accenture at the start of 2014 to continue development of the federal exchange, GAO said. The pact had an estimated value of $91 million, but costs on the contract had risen to more than $175 million as of June 5 and the system necessary to carry out financial interactions with insurers was still unavailable. The watchdog group said that is currently scheduled to be implemented incrementally through December.

The new GAO report includes five recommendations for CMS, and Slavitt said he agrees with all of them. But he did take issue with the watchdog's characterization of the Accenture contract. While he said he thinks it was characterized as ballooning in costs, he noted that there was an initial contract before the work was scoped out.

Asked about steps the agency is taking to implement the recommendations, Slavitt said it's now very clear who can give work to the contractor and how it gets approved, and that Accenture has skin in the game to ensure it delivers. He also said there is intensive management of the project on a daily basis and early-warning indicators, among other things.

"Fortunately or unfortunately, the GAO report wasn't news to people at CMS. I think the people at CMS who've worked awfully hard but lived through that nightmare don't want to go through that again. So I think actions were underway well before seeing this report," Slavitt said.

July 29, 2014 -- Doctors, researchers, and officials at companies such as Humana Inc. are tinkering with ideas for expanding the use of remote medical visits and services, but the true driver for expansion of telehealth likely will be the nation's biggest purchaser of health care.

For now, the Centers for Medicare and Medicaid Services (CMS) is taking a "rather cautious" approach in its payment policies for remote services and monitoring, Megan McHugh, a health researcher from Northwestern University, told a House panel last week.

That's justified given that the evidence for benefits has not been conclusive, she said. Remote medical consultation and monitoring have been hailed by many advocates as potential game-changers that could cut costs and help people better manage chronic illnesses, such as diabetes.

Yet, studies so far have drawn opposing conclusions about the benefits, McHugh said. She cited a compilation of 20 reviews that found telemedicine effective, while 22 others found it to be of limited benefit or ineffective. Another 19 were less confident of the benefits, but did note its potential.

"The gradual expansion of telemedicine coverage under Medicare is a sensible course of action and one that will produce a slow but steady increase in the number of small practices that effectively and efficiently use telemedicine," McHugh told the House Small Business Committee's panel on health and technology.

Medicare's decisions ripple beyond even the pool of roughly 50 million people covered by the program for the elderly and disabled. They are "magnified" because insurance companies often look to CMS decisions in setting their own policies, McHugh said. Through its rulemaking process, CMS has expanded somewhat the field of doctors and patients for which it will pay for telehealth, she said.

For 2014, CMS has somewhat widened the geographic limits that had been earlier written to restrict payments for the services to cases where people faced long trips to see a doctor. By allowing telemedicine payments for some parts of the metropolitan statistical areas, CMS has made services reimbursable for about 1 million more people enrolled in Medicare.

There's clearly a drive among some lawmakers to get CMS to take a more expansive approach, even as small-scale experiments take place around the country that may make clear both the advantages and shortcomings of the technology.

Sen. Thad Cochran, R-Miss., this month introduced a bill (S 2662) that's intended to waive certain Medicare restrictions on telehealth. It's a companion measure to a bill (HR 3306) from Rep. Gregg Harper, R-Miss., which has about 20 cosponsors. The American Telehealth Association, which includes companies such as Humana and Dutch technology company Philips, supports the measure.

Smaller-scale efforts underway include a Humana program intended to help elderly people remain in their homes longer by protecting against falls and other health threats.

Humana in December said about 100 people in its Medicare Advantage programs had enrolled in the pilot program intended to use remote monitoring to help frail elderly people continue living in their own homes. The project involves in-home sensors and remote monitoring that will report changes in normal patterns of movement to Humana care managers. The sensors will check on daily activities such as sleeping and eating. Changes in patterns for these activities can be early warning signs of illness, and detecting them may allow Humana workers to step in earlier to offer aid, the company said.

In testimony for the hearing last week, McHugh said that dermatologists at Kaiser Permanente in San Diego were able to handle 50 percent more cases through a remote teleheath system, in which patients' history and images of skin lesions were made available to them, than they would have been able to handle in face-to-face visits.

The question of licensing across states for telehealth services also arose at the hearing. Chris Collins, R-N.Y., the chairman of House Small Business' health and technology panel, asked whether some exceptions to federal rules might be needed to allow doctors to get reimbursed for seeing their own patients via telehealth when they are far from home.

"I am from western New York and we have a lot of folks in our older population who go south for three months to Florida," he said. "It's not a New York doctor poaching in the Florida area for clients but an existing client relationship."

July 30, 2014 -- What happens when a big state with a big uninsured population goes all out to adopt the health care overhaul law? In the case of California, a huge increase in coverage that brings the newly enrolled a greater sense of security but also difficulties paying their premiums.

Of Californians uninsured prior to the Oct. 1 start of open enrollment under the overhaul, 58 percent now report having health insurance, according to a recent survey from the Kaiser Family Foundation. That "translates to about 3.4 million previously uninsured adult Californians who have gained coverage," the foundation said.

The largest chunk of the newly enrolled signed up for California's expanded Medicaid program. Employer coverage was the next biggest source of insurance for the newly enrolled, followed by California's insurance exchange and by non-group plans sold outside of the exchange.

Specifically, 25 percent of previously uninsured Californians said they now are part of California's Medicaid program, which is called Medi-Cal. Twelve percent said they obtained coverage through an employer, followed by 9 percent through the exchange, called Covered California, and five percent who enrolled in non-group plans outside of Covered California.

Fifty-two percent of previously uninsured Hispanics reported signing up. Fifty-eight percent of previously uninsured young adults between the ages of 19 and 34 enrolled. Fifty-four percent of previously uninsured people with incomes at 138 percent of the federal poverty level or less got coverage. And 53 percent of the uninsured who reported fair or poor health said they'd gotten coverage since last summer.

Outreach efforts paid off, with 69 percent of the previously uninsured who said they'd signed up reporting they were contacted about getting coverage.

Seventy-three percent of the newly insured said their plan is a good value and 64 percent said they felt well protected by their plan. Thirty-seven percent said their new coverage made them feel more financially secure compared to 16 percent who said they felt less secure.

But in a finding that stirs uncertainty about whether they will keep up their coverage, 46 percent of the newly uninsured who got coverage in plans other than Medi-Cal said that paying for coverage is difficult.

July 29, 2014 -- One of the hot new businesses emerging due to wasteful Medicare spending is the streamlining of care for chronically ill patients after they leave the hospital.

Analysts on Wall Street–and increasingly in Washington policy circles–see the "post-acute" world of home care, rehabilitation hospitals, skilled nursing facilities and other providers as laden with inefficiency.

Both investment firms and policymakers are zeroing in on the sector as they weigh business opportunities or hunt ways to cut deficit spending or offset federal outlays for efforts such as overhauling Medicare physician payments.

But some policy watchers worry that too much of the money saved in Medicare by these new "efficiency contractors"–Nashville-based NaviHealth co-founded by former Centers for Medicare and Medicaid Administrator Tom Scully is a prime example–will wind up going to investors .

Hospitals and insurers contract with NaviHealth to save money by lining up the most efficient provider for a particular post-acute patient. NaviHealth nurses stay in touch with the patient during post-acute care to oversee treatment and avoid costly hospital readmissions.

Critics say not enough of the potentially huge savings companies like NaviHealth may generate will benefit the public by making Medicare more sustainable or funding services needed by the frail elderly.

But Scully counters that it's precisely the profit motive and private sector competition that will drive down Medicare spending and make taxpayer savings possible, much like they factored in lowering prescription drug outlays.

Joanne Lynn, director of the Center for Elder Care and Advanced Illness at the Ann Arbor, Michigan-based Altarum Institute, said more savings from efficiency contractors should go to fund services the frail elderly need on a daily basis as they near the end of their lives. The demand is blossoming in a way that never existed in past generations, she said.

Lynn observes that legislation aimed at reducing wasteful care may also wipe out spending that gives families time to make needed adjustments.

"Frail elderly people and their families often urgently need services that Medicare does not directly cover," she said, citing support for housing, food and activities of daily living.

"Clinicians and families have quietly found it expedient to provide some supports, such as skilled nursing facility care, usually just a couple of weeks so the family can rearrange things and the patient can stabilize and so that in-home care becomes easier to do," Lynn wrote in an April 24 blog post for the journal Health Affairs.

"However, this also adds impetus to the remarkable overuse of medical care, with no clear incentives to be more efficient," Lynn wrote. Considering what we know today, "we could actually right-size the medical services, generate the savings, and redesign the delivery system to ensure reliability and supportive services."

Referring to companies like NaviHealth, Lynn and her colleague Anne Montgomery said earlier this month that "some private gain using public dollars may be necessary to catalyze reforms of the post-acute care sector. However, the size of the looming potential loss for the Medicare Trust Fund is stunningly large."

There's little dispute that patients often get treatment in inefficient settings. What that often boils down too in practical terms is the view that many patients could get care through well designed home care services rather than in skilled nursing or rehabilitation facilities.

The independent Medicare Payment Advisory Commission (MedPAC) called attention to wasteful post-acute spending during a May 21 hearing of the House Energy and Commerce Health Subcommittee. MedPAC Executive Director Mark Miller said the yearly cost to Medicare of those services has ballooned to $62 billion, twice what it was in 2001. "In many cases, payments are set too high relative to the providers' cost to treat Medicare patients," he testified.

Bipartisan legislation (HR 4994) introduced June 26 would begin tackling the issue by developing a standardized way of assessing the quality of care given by post-acute providers. That would help lay the groundwork for better choices for post-discharge planners and less wasteful spending.

The hearing focused attention on another bill, HR 4673, introduced by House Republican David B. McKinley of West Virginia and backed by Republican Tom Price of Georgia, which would give coordinators like NaviHealth most of the savings with the remainder going to providers, Lynn says.

Scully in a recent interview scoffed at the idea taxpayers would be shortchanged.

"[Savings] are going to the taxpayer," he insisted, just as when competing prescription drug plans helped lower outlays for the Medicare drug benefit. "Where do you think they went in Part D?" he asked.

"The idea that we're taking all this money out of the system and it's all going to private investors, that's like saying 'we should build a hangar next to the Pentagon and hire a whole bunch of government civil servants to build airplanes,'" he said. "How would that work?"

"The reality is our country is built on people making a margin," he added." In the government programs they should be modest. But that's what drives change."

Scully said it's "very legitimate" to debate what those margins should be. Lynn agreed that it's appropriate to debate the margins, but said they were too high in the McKinley bill.