By Melanie Zanona, CQ Roll Call

December 3, 2014 -- Health care spending in the United States continued to slow down in 2013 and mimicked the modest growth of the overall economy, according to a recent report from the Centers for Medicare and Medicaid Services (CMS).

Total spending for health care increased by 3.6 percent last year—the lowest since the agency starting tracking such data in 1960—compared to 4.1 percent growth in 2012. CMS officials attributed the slowdown to the sluggish economy, cost savings arising from the 2010 health care law and federal budget sequestration, among other factors. 

"The key question is whether health spending growth will accelerate once economic conditions improve significantly," said Micah Hartman, a statistician in the office of the actuary at CMS. "Historical evidence suggests it will."

Health spending's share of the national gross domestic product in 2013 remained at 17.4 percent, largely unchanged since 2009.

Spending on private health insurance and Medicare, the federal insurance program for the elderly and disabled, contributed to the slowdown. A shift towards high deductible insurance plans held health insurance premiums to a 2.8 percent increase while slowing enrollment rates limited spending on Medicare to a 3.4 percent increase. Both were affected by various provisions of the health care law.

Spending on hospital care, physician and clinical services and out-of-pocket costs also contributed to the overall slowdown. But Medicaid and retail prescription drug spending actually experienced faster growth rates in 2013.

Retail prescription drug spending increased 2.5 percent, up from less than one percent the previous year, which was partly linked to price increases in brand-name and specialty drugs. Meanwhile, spending on Medicaid, the federal–state health program for the poor, increased by 6.1 percent, compared to a 4 percent increase in 2012 and 2.5 percent in 2011. CMS officials attributed the boost to the expansion of benefits in some states and the temporary payment increases for primary care physicians under the health care law.

"It takes time for legislative changes to work through the system, as well as changes to income and wealth during a recession," Hartman said. "Health care spending has been growing at historically low rates."

By Rebecca Adams, CQ HealthBeat Associate Editor

December 2, 2014 -- Efforts to reduce the number of hospital patients who die or become sick from preventable problems picked up speed from 2012 to 2013, according to data the Department of Health and Human Services (HHS) released last week.

About 50,000 fewer fatalities linked to hospital-acquired problems were logged from 2010 to 2013 than would have been expected if the numbers had mirrored 2010 federal estimates.

About 1.3 million fewer hospital-acquired illnesses and deaths occurred from 2010 to 2013, which amounts to a 17 percent decline in hospital-acquired conditions. The quality improvements saved as much as $12 billion in health care costs, said HHS officials in a telephone briefing ahead of the data release.

Many improvements took place after Medicare's financial incentives to improve quality began making a major difference in hospitals' bottom lines.

Potential safety problems include dangerous drug interactions, bloodstream infections after a tube was put in to deliver drugs or IV fluids, pressure ulcers, catheter-associated urinary tract infections, and infections on the parts of the body where a patient has had surgery. The biggest improvement was in the number of central-line infections.

The improvements mean that there were about 121 preventable problems for every 1,000 hospitalizations in 2013, compared to 145 adverse events per 1,000 hospitalizations in 2010.

The report updates information that the agency released in May that showed that there were about 132 problems for every 1,000 hospitalizations by 2012.

Concerns about hospitalized patients dying because of medical mistakes or infections gained national attention 15 years ago, when the Institute of Medicine found that as many as 98,000 people die each year from such dangers. Health policy experts likened the problem to a wide body airliner crashing every day.

HHS Secretary Sylvia Mathews Burwell said in remarks last week that the health care system is changing to reward quality instead of the volume of services. The focus on prevention is driven by government payments and partnerships between hospitals and industry that HHS developed a few years ago.

"If we're being straightforward with one another, there is something else about our system that was broken for generations—and that's the way we chose to work on fixing it," she said at a conference on quality in Baltimore. "It used to be that all too often, government was over here, business was over there, nonprofits were someplace else. Today, we're working together like never before, and we have some historic progress to show for it."

Rebecca Adams can be reached at [email protected].

By Rebecca Adams, CQ HealthBeat Associate Editor

December 4, 2014 -- More than 70 percent of people now enrolled in a health law marketplace plan could get cheaper monthly premiums by returning to the healthcare.gov marketplace and picking a different plan, say Obama administration officials. But less than 6 percent of the 6.7 million current enrollees had renewed their coverage by Nov. 28, and those who don't switch in the next 11 days will be automatically renewed in their same plan for 2015.

Administration officials said recently that they did not know how many of the 397,870 people who renewed coverage by Nov. 28 chose different plans.

Consumers who have a silver plan, which pays for 70 percent of medical costs, could save an average of $492 per year by picking a different silver plan, according to a Department of Health and Human Services (HHS) report released last week.

And if consumers look at all of their options, in every tier of coverage, 79 percent of them could find a plan with a premium of less than $100 after tax credit subsidies, the report found in its data from 35 of the states that use healthcare.gov.

One reason why consumers should shop around is the value of subsidies is not going up as much as the cost of the cheapest plans in the silver tier of coverage. The value of subsidies is tied to the second-lowest cost silver plan in a market, and premiums for those plans are increasing by 2 percent on average, before tax credits. But the average premium cost for the cheapest silver plans are rising by 5 percent, according to the report.

If consumers don't switch and their plan premium cost goes up by the average amount, those people could find that their subsidy doesn't go as far.

"There are real financial consequences overall to people paying attention and switching and looking for the lowest cost plan in the type of policy that they're interested in having," said HHS Assistant Secretary for Planning and Evaluation Richard Frank on a call with reporters.

"That just underscores again the importance of people coming back," Kevin Counihan, the chief executive officer of the healthcare.gov marketplace, told reporters.

Some states have much higher than average increases or decreases in premium costs.

The total savings in premiums if all current consumers switched to the cheapest plan available would be $2 billion, the report said. Frank said he didn't have data available on how much each consumer could save on average.

By historical averages, premiums for individual insurance are rising less than in the recent past, said Frank.

Administration officials are working to reach people in the short time that is left by mail, email and phone calls to warn them before they are auto-renewed into their current plan, or if that plan is not being offered again, a similar plan. CMS Principal Deputy Administrator Andy Slavitt said that many customers will be contacted at least three times and some as many as a dozen times.

Counihan said that the marketplace is far easier to use this year than last year and he believes the administration is off to a good start.

"We're where we want to be at this point in our implementation," he said.

Rebecca Adams can be reached at [email protected].

By Rebecca Adams, CQ HealthBeat Associate Editor

December 3, 2014 -- Members of the House Energy and Commerce Health Subcommittee voiced bipartisan support last week for extending funding for the Children's Health Insurance Program (CHIP) past its expiration of Sept. 30, 2015. But questions posed at a panel hearing indicated that some Republicans are exploring whether to pass on more of the costs to states or to consumers.

The hearing was held the same day that the panel released letters from governors in 39 states calling for an extension of the funding for children's health coverage. About 8.4 million people were covered by CHIP last year.

The health care law allowed the program to continue through 2019 but only authorized funding for it through Sept. 30, 2015. States would probably exhaust that money in fiscal 2016. Lawmakers are weighing how to update the program next year.

The Medicaid and CHIP Payment and Access Commission, known as MACPAC, recommended at least a two-year extension of the program. Many patient advocates want a four-year reauthorization.

When the funding expires next fall, the health law provides legislative authority for the federal matching rate for CHIP to spike by 23 percentage points. If Congress allows that to stand, the average federal matching rate to states would jump to 93 percent of costs under the health care law. But Republicans appeared unlikely to provide funding for an increase that large.

"Like many of my colleagues, I believe we need to extend funding for this program in some fashion," said Subcommittee Chairman Joseph R. Pitts, R-Pa. "At the same time, we should ensure the program complements—rather than crowds-out—private health coverage. We should also ensure CHIP is a benefit that is targeted to those who are most vulnerable—rather than one that effectively subsidizes coverage for upper-middle-class families."

Pitts at one point asked representatives from the Government Accountability Office, MACPAC and the Congressional Research Service if lottery winners were able to get coverage under CHIP. He said that he'd heard of such cases in Medicaid, the federal and state program for the low-income, including one person who won $25 million and who Pitts said received coverage through the program.

MACPAC Executive Director Anne Schwartz and GAO Director of Health Care Carolyn Yocom appeared puzzled by his statement.

Schwartz said she was not familiar with those situations and that any lottery winnings that are taxable earnings would be considered in calculations to determine whether someone is low-income enough to qualify for CHIP. Yocom echoed her comments.

Rep. Morgan Griffith, R-Va., asked whether CHIP is currently subsidizing the upper-middle class.

CRS Health Financing Analyst Evelyne Baumrucker said that the 2009 reauthorization of the program encouraged states to focus on covering low-income people and discouraged states from covering families with income that is more than three times the federal poverty level. Congress said that the matching rates to states for families with income above that threshold would fall to the Medicaid matching rate, which is an average of 57 percent instead of the average CHIP matching rate of 70 percent.

About 90 percent of the families that receive coverage through CHIP have incomes that are less than twice the poverty level, said Schwartz.

Rep. Renee Ellmers, R-N.C., expressed concerns about very sick children, then asked if a potential compromise could lie in asking families to pay higher costs for their care. The current program caps patients' costs at 5 percent of the family's income.

Schwartz noted that the children that Ellmers said she is most concerned about have the highest cost-sharing.

If Congress raised the limit on out-of-pocket spending for consumers, the families with children who are particularly ill would probably be affected most.

Joe L. Barton, R-Texas, asked whether it would make sense to include a CHIP reauthorization in more partisan legislation next year to repeal or change the health care law.

That idea was discouraged by Leonard Lance, R-N.J., who said that CHIP predates the health care law and many CHIP supporters are vigorously opposed to the health care law.

"I hope we can not confuse the two," he said.

If Congress lets funding lapse entirely, states would still face requirements in the health law to continue covering children under the same eligibility guidelines until 2019. But the states that use a particular model of CHIP, in which the state expanded Medicaid to create the program, would get fewer federal dollars because the matching rate would fall to the Medicaid level. About 30 percent of children are in that type of CHIP program now, but roughly half will be in it in fiscal 2015.

Other children currently in CHIP live in states that created a separate CHIP program from scratch. If CHIP funding were to expire, those states are supposed to shift children into any plans offered through the health law's new marketplaces that HHS certifies as being comparable to CHIP. But it isn't clear how many marketplace plans HHS officials would consider to offer comparable coverage to the benefits in CHIP.

Many marketplace plans ask families to pay higher out-of-pocket costs and offer fewer benefits than CHIP coverage, said Yocom.

Separately, an analysis released by the Georgetown Center for Children and Families on Florida's CHIP coverage found that the state would be one of the hardest hit if funding for CHIP ended. The center's report suggested that Florida would lose between $495 million and $560 million in federal funds annually. About 400,000 children over the course of a year would lose CHIP coverage.

In the hearing, the witnesses said that some children who could lose CHIP coverage would remain uninsured.

"An abrupt end to CHIP would be a step backward from the progress that has been made," said Schwartz.

Rebecca Adams can be reached at [email protected].

By Rebecca Adams, CQ HealthBeat Associate Editor

December 2, 2014 -- Health provider alliances known as accountable care organizations (ACOs) could be paid differently under a proposed rule recently released by the Centers for Medicare and Medicaid Services (CMS).

If hospitals and doctors that coordinate the care of Medicare patients save money, they can share some of the savings with the government. The proposed rule affects the ACOs that operate under the Medicare shared savings program.

Federal officials said the rule is intended to address concerns such as cost targets tied to national increases in Medicare spending that the ACOs are expected to meet. Some ACOs say that costs in their communities are rising higher than the national average.

And providers have been concerned that if they save money early on, they were not rewarded for their efforts.

Federal officials said in the rule that they are exploring alternative methodologies that would not punish ACOs if they saved money and would be less tied to the ACO's past performance. The agency also is considering ways to tailor ACOs' financial rewards to local markets rather than a national average.

Provider groups can get a higher share of savings if they also agree to absorb extra costs if care arrangements don't hit their targets. They also can opt to insulate themselves from financial losses. The ACOs operate under three-year agreements with the government.

The rule proposed that ACOs could renew their agreements once without being required to use the model that could cause them to lose money. Currently, ACOs that share savings but aren't exposed to losses were supposed to switch to a model that would potentially expose them to losses after their initial three-year contract.

And agency officials want to establish a new model for providers that want to get higher savings but are also ready to accept the risk of losing money. Under the new option, CMS would let ACOs to keep up to three-fourths of the money beyond a financial threshold.

The National Association of ACOs said it was pleased that CMS officials embraced some of its members' suggestions but disappointed in other ways. Federal officials applied many of the group's suggestions only to those provider groups that agreed to take on risk and lose money if they did not meet certain financial goals. The trade association had hoped its recommendations would also apply to all ACOs.

ACOs also are encouraged through demonstration projects like the Pioneer program sponsored by the CMS Center for Medicare and Medicaid Innovation, but the proposal does not affect those provider alliances.

The proposal was sent to the Office of Management and Budget  (OMB) on June 26 for interagency review and was stuck there for five months, until OMB officials cleared it on Nov. 26. A federal notice said that the proposal was changed after OMB got it.

Centers for Medicare and Medicaid Services Deputy Administrator Sean Cavanaugh had said in October that officials will "hopefully have a final rule early next year".

Back then, Cavanaugh said that Obama administration officials were trying to encourage providers to participate in ACOs.

"We need to improve the incentives that the ACOs receive, improve the information, and help build the capacity of the ACOs," he said in October.

The program now includes more than 330 ACOs that cover about 4.9 million beneficiaries. More than 125,000 Medicare providers participate in 47 states, plus the District of Columbia and Puerto Rico.

"This proposed rule is part of our continued commitment to rewarding value and care coordination—rather than volume and care duplication," said CMS Administrator Marilyn Tavenner in a statement.

By Melissa Attias, CQ Roll Call

December 5, 2014 -- Congress is set to close out the year without moving compromise legislation to replace Medicare's oft-criticized physician payment formula, leaving lawmakers with three months to act before doctors face a planned reimbursement cut of more than 20 percent.

Not advancing a permanent fix would be a huge defeat for physician groups and lawmakers such as Senate Finance Chairman Ron Wyden, D-Ore., who have been pressing for passage in the lame duck rather than having to start over next year.

The Senate Finance, House Energy and Commerce and House Ways and Means committees agreed on a policy (HR 4015, S 2000) in February to replace the Sustainable Growth Rate formula, or SGR. But disagreement about how to offset the cost scuttled the effort. Congress instead cleared its 17th "doc fix" law (PL 113-93) since 2003 to temporarily avert cuts of 24 percent. That funding patch expires March 31.

Debate over an omnibus spending bill to keep the government running and other pressing concerns have crowded the lame duck agenda and robbed any momentum for clearing a permanent fix.

"Nobody I know is trying to push it in the lame duck, especially with the mess that the lame duck is currently in," said Orrin G. Hatch of Utah, top Republican on the Senate Finance Committee and expected chairman in the 114th Congress.

Hatch said the issue will resurface in the spring, and added he'll do his best to get the matter resolved. 

Georgia Republican Johnny Isakson, another member of Senate Finance, confirmed the permanent fix is dead for the year. "There was a hope back a couple months ago that might happen, but it's not going to happen," he said.

House lawmakers were similarly deflated, in contrast to the optimism they expressed in September. Kevin Brady, chairman of the Ways and Means Health Subcommittee, said Congress has essentially given up on action in the lame duck.

"Negotiations are not going as well as we'd hoped," said the Texas Republican. "The transition, you know, to a new Senate is part of that and I'm not certain all the players understand the urgency of sitting down now and working out these pay-fors to reach that deadline in March."

"I feel like we're stuck where we were last March," Brady added.

Jim McDermott of Washington, Brady's Democratic counterpart on the subcommittee, agreed that disagreement over offsetting the policy is still the issue. He called the money "on-the-books debt" and said Republicans should wipe it out.

Henry A. Waxman of California, the top Democrat on Energy and Commerce, also questioned whether an offset is necessary. Although some GOP lawmakers have said they're open to passing a permanent fix without one, many believe it needs to be paid for.

"It's hard to understand why we have an offset issue with that when we don't with other things that we're passing at the last minute," Waxman said, noting that his hopes are getting "slimmer and slimmer" for the lame duck but that he refuses to give up all hope.

McDermott predicted that Congress will pass another short-term patch, particularly if the cost of the compromise rises, as expected. The Congressional Budget Office estimated last month that the legislation would cost $144 billion over a decade, up from a roughly $138 billion, 11-year projection released in February.

Energy and Commerce Health Subcommittee Chairman Joe Pitts, R-Pa., said he's been pushing for action in the lame duck but received no encouraging signs from leadership. He's concerned that the retirements of several lawmakers who brokered the compromise, plus a potential increase in cost, will make it harder to advance a replacement package in the 114th.

"I think it's easier now than later," he said. A Democratic aide said staff has updated the compromise bill in the unlikely event leaders decide to add it to a year-end package.

Still, Pitts said, lawmakers will try to reintroduce and move the agreement next year before the patch expires in March. And he suggested that instituting "dynamic scoring" could help with the offset issue, maintaining that it could allow the replacement bill to pay for itself over 15 or 20 years.

Brady said he expects the compromise bill to be reintroduced for starters, but that Hatch may have some areas that he wants to look at when he becomes chairman. He noted that the measure could also need to be updated because some original language was incorporated into other legislation.

Restarting the legislative process would also provide an opportunity for other lawmakers to seek changes, despite worries that reopening the debate could lead the deal to unravel. Rep. John Fleming of Louisiana, incoming co-chairman of the GOP Doctors Caucus, said he has concerns about "onerous requirements" related to quality measures.

But with lawmakers headed out of town as soon as next week, McDermott said the matter has already slipped from the immediate agenda.

"It's not going to happen now," McDermott said. "You can bet your lunch on that."