By John Reichard, CQ HealthBeat Editor

January 9, 2014 -- Two new studies monitoring the traffic on the new insurance exchanges that opened up under the health care law provide ammunition for both its supporters and critics.

They show that a growing number of Americans are going to the online sites and are signing up for coverage, particularly in states that are gung-ho about the health care law (PL 111-148, PL 111-152).

On the other hand, they also show that enrollment so far is relatively tiny in many states hostile to the law, and that people with canceled policies who are given a chance to stick with those plans are doing so in many cases. That could be a problem for the marketplaces if those people are disproportionately good insurance risks whose relatively low costs would help keep coverage in exchanges affordable, had they obtained 2014 coverage there instead.

About one-quarter of Americans potentially eligible for health coverage on exchanges under the health care law had visited them by December, up from 17 percent in October, the Commonwealth Fund reported last week.

Two of every five visitors through December—41 percent—were in the 19 through 34 age bracket. Overall, 77 percent of marketplace visitors said they were in excellent, very good, or good health, the fund said.

The survey was carried out from Dec. 11 through Dec. 29.

Telephone interviews of 2,592 people of ages 19 to 64 were completed, of whom 622 fell into the category of lacking insurance, having bought it on the individual market, or having bought a policy on an exchange. The 622 included adults without insurance, those who purchased coverage on their own in the individual market, and those who said they bought a plan on an exchange.

"It is encouraging to see a greater share of those who could get coverage visiting the marketplaces, particularly the large share of visits by young adults and people in good health, since their participation will be critical to the marketplaces' success over time," said lead survey researcher Sara Collins, a Commonwealth Fund vice president.

On the other hand, visiting the marketplace is one thing, signing up is another.

Another finding from the survey was that 60 percent of all adults with individual coverage said that their insurance carriers had offered them the option of renewing their plans through 2014, and 82 percent of those said they planned to keep their current plan.

About one-third of those potentially eligible for coverage in new private plans or expanded Medicaid were unaware of the new marketplaces as places they might shop and almost half didn't know that financial help to buy coverage is available under the law, underscoring the importance of health care law promotional efforts that Congress has refused to fund.

Another study, by Harvard sociology professor Theda Skocpol, found that the health care law is working quite well in states that are fully behind it but that most states do not fall into that category.

Skocpol determined what percentage enrollees in Medicaid or private plans through the marketplaces made up of the number projected by the Kaiser Commission in the case of Medicaid and the Congressional Budget Office in the case of enrollments in private plans offered on exchanges.

"Full-go" states that were expanding Medicaid and running their own exchanges were doing quite well. Enrollments in those states totaled 43 percent of the goal set by the Kaiser Commission on Medicaid and the Uninsured and the State Children's Health Insurance Program, with the open enrollment period still having through March 31, 2014 to run. And enrollment in those states totaled 37 percent of CBO projections for private plan enrollment. But there were only 14 such states.

Other states had far lower percentages of enrollment against these benchmarks. They included 23 "just say no" states that refused to expand Medicaid or to officially cooperate with the federal exchange, Skocpol said.

The 23 had Medicaid enrollment totaling only 1.5 percent of the Kaiser goals. and private plan enrollment totaling just 6 percent of the CBO projections.

The enrollment picture was somewhat better in the 13 states that fell somewhere on the spectrum between full cooperation and full resistance, though the 'tweener states had a long, long way to go to meet the benchmarks.

"My analysis reveals that major progress is already happening in 14 "full-go" states, where officials are expanding Medicaid and running their own exchanges," Skocpol wrote. "Enrollments are happening more slowly in states where leaders accept all or part of reform but rely on the federal website and were hindered by its start-up woes," she added. "Across the board, enrollments are minimal in states where authorities refuse to expand Medicaid or encourage exchange enrollments."

Skocpol said her findings show that it is wrong to declare the law a failure. She said it's notable that the health care law "is moving forward the most rapidly and substantially in the states where officials wholeheartedly support reform," and that the best way to track its success is by "comparing states acting in good faith to those engaged in delay or obstruction."

By John Reichard, CQ HealthBeat Editor

January 6, 2014 -- National health spending growth remained unusually low in 2012—even taking the rare turn of dipping below gross domestic product (GPD) growth—but government economists aren't making return trips to the liquor store to lay in new supplies of champagne.

There is widespread speculation by other economists that something else is at work in producing low spending growth, rather than the traditional impact of a recession on consumer spending. But the authors of the Centers for Medicare and Medicaid Services (CMS) analysis aren't ready to go there.

That's the case even though the report, posted online by the journal Health Affairs, shows that spending growth in 2012 totaled just 3.7 percent, the fourth year of very low growth. Growth "during all four years has occurred at the slowest rates ever recorded in the 53-year history of the National Health Expenditure Accounts," the journal said in a news release highlighting the findings.

"It's still very consistent with what we've seen in the history where two to three, even four years out, you would still see health spending having that lagged impact" from recession, said CMS analyst Aaron Caitlin at a press briefing on the new findings. The report was produced by the office of the actuary at CMS, which has a reputation for independent analysis of health care spending.

President Barack Obama has been quick to credit the health care law for the slowdown in national health spending, and some analysts have suggested that the overhaul may be having a small impact. But overall, "Affordable Care Act provisions effective for 2010 through 2012 had minimal impact on total national health spending," according to slides presented at the briefing.

Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, seized on the report's conclusion that the health care law has had a minimal impact on overall national health spending growth through 2012. "This report shows that the Administration's promise that Obamacare would rein in the skyrocketing health care costs is false," he said in a news release. "This report shouldn't be a cause for celebration, but rather is a precursor to hither costs and more broken promises."

But White House officials said that the overhaul has helped to slow costs down.

"While there is a debate about how much the Affordable Care Act has contributed to this health cost slowdown, there is no doubt that it reduced Medicare spending growth, and most experts believe that Medicare savings spill over into the private sector," Jeanne Lambrew said on a White House blog. Lambrew is deputy assistant to the president for health policy. "And it is a fact that health care prices have grown at record-low rates —and are less affected by recessions and cost sharing than health care utilization is," she added.

Lambrew said that according to the CMS Office of the Actuary, medical price inflation was 1.7 percent in 2012, down from 2.4 percent in 2011. "The Affordable Care Act was designed to contribute to and sustain slow growth in health spending in this nation," she said.

Jason Furman, chairman of the White House Council of Economic Advisors, tweeted that the slowdown is not all because of the recession and is continuing as the economy improves. The health care law is contributing to the slowdown, he said, linking to a White House report issued in November that reaches that conclusion.

The actuaries said that mixed spending trends in 2012, including accelerated spending on hospital and doctor care and slower price growth that braked spending on prescription drugs and nursing facility treatment "produced the fourth consecutive year of low overall health spending growth." That "led to a relatively stable health spending share of GDP."

The authors added that "from our perspective, more historical evidence is needed before concluding that we have observed a structural break in the historical relationship between the health sector and the overall economy." The recession officially ended in June 2009.
Spending in 2012 totaled $2.8 trillion, or $8.915 per person. The share of the economy devoted to health care in 2012 was 17.2 percent, compared to 17.3 percent in 2011.

Historically, health spending rises at an annual clip above GDP; the last time it fell below GDP growth was in 1997, said Anne Martin, the lead author of the report. There was essentially no change in the share that health care made up of GDP between 2010 and 2011, she said. But despite the unusual result, the analysts didn't credit anything other than recessionary effects.

Their analysis of the impact of the health care law found that it increased national health spending by one tenth of a percentage point overall for the years 2010, 2011 and 2012. That was the cumulative impact on spending for the entire three years, not the annual rate on spending growth stemming from the law.

Some aspects of the law drove up spending, while others reduced it. Adding to national health spending were coverage of dependents under age 26 on parents' private health plans, a program for those with pre-existing medical conditions, and outlays to discourage employers from dropping coverage for early retirees.

Also increasing spending were coverage of prescription drugs in the Medicare coverage gap called the "doughnut hole." But health care law provisions reducing Medicare payment updates to providers, setting minimum payouts for health care from premium dollars, and widening drug rebates in Medicaid had a braking effect.

So if the health care law couldn't be credited for the spending slowdown, it could be viewed as largely paying for itself at least in the 2010 through 2012 period.

By John Reichard, CQ HealthBeat Editor

January 6, 2014 -- Medicare spending in 2012 grew 4.8 percent to $573 billion even as enrollment in the program saw its largest one-year increase in 39 years, according to a recent government analysis.

The Medicare spending growth rate was below that for 2011, which was 5 percent. And total Medicare spending per enrollee grew by only 0.7 percent in 2012, slower than the 2.5 percent rate of growth in 2011, said the report by the Office of the Actuary at the Centers for Medicare and Medicaid Services.

Enrollment in 2012 increased 4.1 percent, reflecting the entry into the program of the oldest members of the baby boom generation. More than half of the new enrollees joined the Medicare Advantage program, made up of private health plans that contract to deliver Medicare services.

The relatively small increase in 2012 in Medicare spending per enrollee "was largely due to a prominent decline in spending for nursing home care, which declined by 2.2 percent in 2012 following an increase of 9.9 percent from the year before," said the study posted by the journal Health Affairs.

"This in turn was driven primarily by a one-time payment reduction to skilled nursing facilities," it added.

Medicare spending per enrollee in the traditional fee-for-service part of Medicare rose only 0.6 percent in 2012, down from 2.7 percent in 2011.

This slower growth in fee-for-service spending also stemmed from slower growth in prescription drug spending in addition to the decline in spending for nursing facility care. Smaller provider payment updates under the health law also had an impact. Although spending grew overall for Medicare Advantage, the growth rate per enrollee was only 0.8 percent compared to 1.6 percent in 2011. This partly stemmed from a new payment mechanism in the health care law (PL 111-148, PL 111-152).

Meanwhile, Medicaid spending increased 3.3 percent in 2012, compared to 2.4 percent in 2011. "These were the two slowest annual rates of growth in the history of Medicaid," the study said. But with the expansion of the program this year under the health care law its spending is expected to jump.

By John Reichard and Rebecca Adams

January 10, 2014 -- A potentially historic experiment in the state of Maryland that could blaze a hard-to-follow trail toward long-term control of Medicare spending has won the approval of the Obama administration.

Democrats have strongly resisted block grants or caps in the Medicaid program—making one feature of the new plan, an administration-approved cap on spending in the more politically popular Medicare program, eye-popping to say the least. But left-leaning thinkers, including those affiliated with the Center for American Progress, have advocated global budgets as a long-term solution for the nation's extremely high levels of health spending and Maryland's new plan fits in with that line of thinking.

The plan "modernizes" Maryland's unique all-payer system in which insurers, including Medicare, all pay hospitals the same rates for inpatient admissions. It's a rate-setting approach that other states do not follow largely because it's viewed as government overreach into the private economy.

But with demographic trends driving health outlays ever higher in coming decades, what's unpalatable to many now could prove more enticing later on.

The plan announced last week by the Obama administration with Maryland state officials would limit per capita hospital spending growth in Maryland across the board, not just for Medicare. But it requires savings of at least $330 million over that period for Medicare, with various "guardrails" coming into play as the mechanism to enforce that level of savings.

A Centers for Medicare and Medicaid Services (CMS) news release said Maryland "will limit all-payer annual per capita hospital [spending] growth, including inpatient and outpatient care, to 3.58 percent, below historical trends."

"It's effective as of Jan.1 and changes the underlying orientation of the hospital system away from a price kind of focus to a total cost kind of focus," Joshua Sharfstein, secretary of Maryland's Department of Health and Mental Hygiene, said in an recent interview. Sharfstein said it's fair to describe the approach as a form of cap on Medicare spending for hospitals in the state.

Asked whether such a step will spark controversy, Sharfstein suggested that won't be the case in Maryland. "We have broad support in Maryland for this. It's the flexibility to change the incentives for all payers that really makes it exciting. This isn't just a price kind of focus."
He noted the fact that Maryland already has an all-payer system lays the foundation for the new approach. "It's really the fact that we have this system that allows us to implement an approach like this to cost."

Sharfstein said in the CMS news release that "by shifting away from traditional fee-service payment, Maryland's new model encourages collaboration between hospitals and physicians to improve patient care." It promotes innovative approaches to preventing illness leading to hospitalizations and "accelerates efforts to avoid unnecessary admissions and readmissions," he said. Hospitals, for example, could establish programs with nursing facilities to improve care and thereby reduce readmissions back to the hospitals.

Maryland already has pilot tested the program. In it, a hospital gets a global budget, or a flat dollar payment covering all admissions over a period of time, regardless of how many admissions occur. That means if it finds ways to keep patients healthy and out of the hospital it can, in effect, get more money per patient. Under the current system, the payment rate per patient stays the same regardless of the number of admissions.

In a highly simplified example, assume a hospital now gets $2 per patient. Under the new system, assume it gets a global budget of $100. If it has 50 admissions, it gets the equivalent of the same $2 per patient. But if it can reduce admissions so it treats only 25 patients, then it gets $4 per patient, or double what it gets now.

That creates clear incentives to deny care. But the new approach calls for improving the quality of care by applying certain performance measures to the delivery of services, such as standards to reduce rates of infection.

"Maryland has had this system for decades and the fact that it hasn't driven Johns Hopkins and other prominent institutions out of business, that's important," said Paul Ginsburg, a senior fellow at Mathematica Policy Research. "I believe this CMS contract will include monitoring of quality. It's not like a debut for the Maryland system. It's movement to a more advanced stage. And it's consistent with what Medicare is trying to do with ACOs and bundled payments and what is happening throughout the country."

By Emily Ethridge, CQ Roll Call

January 7, 2014 -- Ron Wyden, heir apparent to the Senate Finance Committee chairmanship, plans to push for bipartisan bills that he says will transform Medicare by focusing on chronic disease and increasing price transparency.

"Dealing with chronic disease, protecting the Medicare guarantee, and holding down costs—that's the ball game for Medicare," said the Oregon Democrat about the legislation. "That's where the money is!"

For now, Wyden won't discuss his plans or goals as prospective chairman, with current Chairman Max Baucus, D-Mont., likely to become ambassador to China soon following his nomination by President Barack Obama. Baucus' nomination was recently sent to the Senate.

"My view is there's one chairman at a time," Wyden said. "I'm on the Finance Committee and I'm assisting Chairman Baucus in any way that I can."

Finance as a panel is hugely influential in health policy in that it holds jurisdiction over Medicare, Medicaid and the Children's Health Insurance Program, and was one of the two Senate committees that produced the health care law (PL 111-148, PL 111-152). Wyden has long had a strong and enthusiastic interest in Medicare policy as well as the complexities of health care.

Despite his reluctance to talk about the chairmanship, Wyden already has several priorities for addressing problems in Medicare, including a bill he plans to introduce soon that would overhaul the program's approach to chronic conditions.

Treating beneficiaries with chronic conditions is one of the program's biggest cost drivers, and Wyden said improving their care would be "extraordinarily important" and "the heart of Medicare reform."

Wyden has been working with Johnny Isakson, R-Ga., on the bill for months, and said they will introduce it soon along with Rep. Peter Welch, D-Vt., and Rep. Erik Paulsen, R-Minn.

Coordination of care for beneficiaries would be emphasized for enrollees with chronic conditions, Wyden said. The bill would ensure that Medicare paid for care coordinators who track scheduling and doctors' visits, and make sure information is shared between medical offices.

Another priority for Wyden is ensuring that his provision on pricing transparency remains in a bill (S 1871) to replace Medicare's troubled physician payment system. The committee approved the bill in December with transparency language from Wyden and Iowa Republican Charles E. Grassley.

"I think this is hugely important, because the day that you get that information out there, the debate about health care is going to change forever," he said.

The language would establish a searchable database of Medicare payments that the public could access for free online.

Wyden said the provision "will be transformative in terms of making sure people have access to information, which everybody says is important, but until you get to the treasure trove of where the data is, which is Medicare, it hasn't gotten done."

Supporters hope to move the replacement legislation to the Senate floor in the first three months of 2014—a time period in which Wyden could ascend to the chairmanship. A three-month payment patch for physicians contained in a budget agreement (H J Res 59) will expire March 31.

Wyden said the committee bill makes several positive changes, including giving a hard date for moving away from Medicare's fee-for-service system and installing payment systems that reward the value of care.

By Rebecca Adams, CQ HealthBeat Associate Editor

January 7, 2014 -- Legislators in a few states will soon be resuming heated debates about whether or not to expand eligibility for Medicaid.

In New Hampshire, Democrats in the House plan to call a vote on this week on legislation that was amended to broaden Medicaid eligibility. That chamber is expected to approve the measure but whether the state Senate will go along is unclear.

Virginia's Democratic Governor-elect Terry McAuliffe plans to use his address to the General Assembly on Jan. 13, two days after his Inauguration, to press for Medicaid expansion. In Virginia, a commission that has been charged with coming up with a recommendation on expansion also is expected to hold a key meeting within the next two weeks, according to the vice chair of the panel.

In most states, the question of whether the state will broaden Medicaid is pretty clear. Twenty-five states and the District of Columbia are expanding their programs for the low-income this year, and most of the expansions took effect on Jan. 1.

Indiana and Pennsylvania are eyeing expansions later. In most of the other states, there is little momentum for expansion in the near term.

But New Hampshire and Virginia are two of the few states that could see further action on broadening Medicaid to more adults this year. Both have Democratic governors who are intent on opening up the program. Because the federal government will pick up all the costs for the newly-eligible adults for three years starting now, both governors argue that they would be giving up much-needed revenues if they don't approve changes that would allow people with income of up to 138 percent of the federal poverty line to get Medicaid.

Other states in which expansion cannot be ruled out include Florida, Utah, Tennessee, and even Montana. But the chances for quick approval are slim in those places.

Next Steps in New Hampshire

Democrats in the New Hampshire House are reviving a discussion that generated passionate debate during a special session in the state this fall. The House has twice passed legislation that would expand Medicaid, including a vote during the special session.

House Speaker Terie Norelli said in a statement that one of the first things Democrats will do in its legislative session is to amend a bill so that the measure will expand Medicaid.

"That is the quickest we can act on the subject, immediately sending the bill over to the Senate upon passage and minimizing New Hampshire's lost opportunity," said Norelli. "The state of New Hampshire and all of the people need us to pass a plan that works immediately. Each day that we wait means dollars not invested in our state's health care infrastructure, care not received by men and women who desperately need it, and good jobs not created in our state."

The measure would allow people who become eligible through the expansion to get the care through any of the three existing managed care plans that serve Medicaid now. Democrats estimate that about 58,000 residents would benefit.

As the marketplace created by the health care law (PL 111-148, PL 111-152) becomes more competitive, the Democratic measure would shift some of the people who qualify under the expansion to marketplace health plans. Currently, only one insurer offers coverage through the marketplace in New Hampshire.

The Medicaid expansion would occur in 2014 but the shift of some of them to marketplace plans would come later.

On Jan. 1, 2017, people who have income between 100 percent and 138 percent of the federal poverty line would start to get their coverage through the marketplace rather than the traditional Medicaid managed care program. But that change would only take place if at least three health plans offer coverage in the marketplace.

Some Senate Republicans are concerned about the costs of expansion when the federal payments decline. After the first three years, federal funding phases down until Washington is providing 90 percent of the money for newly-eligible people starting in 2020.

Other Senate Republicans have signaled a willingness to expand Medicaid but want to move people into marketplace plans more quickly. Democrats say it's important to wait until enrollees have a choice of more than one plan.

"Senate Republicans have said publicly they want to reach an agreement," said Marc Goldberg, a spokesman for Gov. Maggie Hassan, in an interview. "We will see if that plays out in the coming weeks."

Hassan is having conversations with House and Senate leaders about Medicaid expansion, Goldberg said, "and will work with any member of either party who is willing to negotiate in good faith toward a compromise that will work from day one and for the long term."

Searching for Common Ground in Virginia

In Virginia, the legislative session recently opened, shortly before McAuliffe's Jan. 11 inauguration. Legislators are watching to see what types of recommendations come from the Medicaid Innovation and Reform Commission, a panel including state legislators that the state empowered to move forward an expansion if the commission finds that the system is prepared to handle it.

McAuliffe aides say he is open to compromise on the type of expansion that happens in Virginia—as long as the program is broadened.
"He's not taking anything off the table," said spokesman Brian Coy in an interview. "He wants to take this money and grow jobs. So there is no proposal that he would rule out, out of hand, before getting stakeholders at the table."

When asked whether McAuliffe would support a proposal to use Medicaid dollars to buy consumers coverage through the new federal marketplace, Coy said the future governor is open to that type of approach. States such as Arkansas and Iowa have received federal approval to do that.

"He's familiar with those ideas," said Coy. "He's willing to make that part of the negotiations. There are various ways in which this could get done. He's looking forward to work with Republicans on something everyone can get behind."

McAuliffe sought to ameliorate concerns from Republicans by keeping on staff outgoing GOP Gov. Bob McDonnell's Secretary of Health and Human Resources Bill Hazel, a move that irritated some of McAuliffe's liberal supporters.

McAuliffe will have to work off McDonnell's proposed budget for this year, which doesn't include expansion. McDonnell also included language that would sunset any expansion in June 2016.

The legislature will debate that budget and McAuliffe will have the choice of signing or vetoing it. But Coy said that the Democrat does not expect to have to veto a bill if it doesn't include expansion because he is hopeful that the two sides will come together.

"Gov.-elect McAuliffe has reached out to every single member of the assembly to explain the virtues of doing this," said Coy. "It's certainly a topic he's discussed with all delegates and senators from all corners of the commonwealth."

Republicans in the legislature have been opposed to expansion and it's unclear whether they will come around. The House members of the Medicaid commission held an internal meeting last week to begin work on their own proposal to try to save money in Medicaid, which potentially could allow some members to feel more comfortable with expansion.

Steve Landes, a Republican legislator who is the commission vice chair, said that the package of ideas will probably include ideas such as creating a medical home for enrollees so that patients would be encouraged to go to the doctor's office instead of the emergency room. Landes said that the model of expansion that Arkansas and Iowa will use is getting some notice.

"Arkansas is definitely one of the things we've looked at," he said. "A little bit of concern is you're still taking the money and the potential is the money may not be there in the future" if federal reimbursements decline more than promised.

Matt Salo, the executive director of the National Association of Medicaid Directors, predicted that more states will take a closer look at expansion now that federal officials have approved the approach used in Arkansas and Iowa.

"In those states, clearly you've seen the administration move a little further," Salo said. "In each of those states, not everything they asked for, they got. But every time there's movement on the map, other people are saying, 'Oh, well, if they'll go this far maybe we can do that. Maybe we could get them to come a little further.'

We're weaving the tapestry as we go. What's approvable now is not what was approvable 12 months ago and who knows what will be approvable 12 months from now."