January 13, 2014 -- Federal officials reported last week that nearly 2.2 million Americans through Dec. 28 selected health plans from federal and state insurance exchanges. The officials said they are pleased with the sign-up rate by the key demographic group of young Americans, even though so far the percentage of young adults is lower than what the Obama administration has said will be needed by the time that open enrollment ends on March 31.

About 55 percent of the 2,153,421 people who had signed up by Dec. 28 were 45 years old or older, according to the Department of Health and Human Services (HHS) report. Another 15 percent were 35 to 44 years old. People in those age brackets tend to have higher costs than younger people.

About 30 percent were age 34 and under, the agency said.

That group of younger people includes some individuals who were under age 18, presumably dependents of those who have picked a plan. The proportion of people in the 18 to 34 group was 24 percent, roughly in line with the percentage that group makes up of the general population, which is 26 percent.

Some analysts have used 40 percent as a benchmark of what slice of the exchange population should be under age 34 in order to assure there are enough healthy people in the pool to offset the costs of insuring older enrollees. The 30 percent figure isn't far from that—and federal officials said during a mid-day telephone press briefing that it will grow.

"We'll see more and more younger people coming in," predicted Gary Cohen, the director of the Center for Consumer Information and Insurance Oversight at the Centers for Medicare and Medicaid Services.

"Many of them may have applied and not chosen a plan because they want to think about it, they want to shop around," Cohen added.

Regarding the under age 34 group Cohen said that overall, "We're actually very pleased with the percentage that we have so far and we expect that percentage to increase." That was the experience in the state of Massachusetts when it launched its coverage expansion plan several years ago—that young people came in much larger numbers at the end of open enrollment.

An outside health policy expert echoed that view.

"I expect more young people to sign-up for coverage as open enrollment continues, so the age mix should continue to improve from this point forward," said Avalere Health consultant Caroline Pearson. "The people who signed up early in open enrollment are most likely to be those with high health care needs, which tends to be an older population."

Overall Turnout Important

Robert Laszewski, a leading insurance industry analyst, warned that the balance of young and old Americans in the marketplaces is an issue that has been overblown. The overall turnout is key, he said, adding that it's much too low so far to feel any confidence about the long-term success of the health law.

Laszewski said in an email that it's "dead wrong" to say, as some in the administration have, that total enrollment isn't as important as the age mix of enrollees.

The access that people with costly preexisting medical conditions are guaranteed under the health law (PL 111-148, PL 111-152) means that a very large group of people have to have coverage in order to offset their costs and keep premiums affordable for all, he said.

Assuming the health care law's target audience is some 30 million uninsured people, 70 percent of them must be enrolled in order to absorb costs, he said. For the exchanges to be successful they are going to need to climb to an enrollment of 20 million people, Laszewski said.

But he suggested that target is going to be very hard to reach because insurers at some point will jack up rates if too many of their new enrollees are unhealthy. A reinsurance and "risk" corridor program under the law will absorb their early losses, he said. It will do so sufficiently to keep insurers from jacking up their rates in the exchanges in 2015, he added.

But after that rates will quickly rise and become unaffordable if there's an imbalance of bad risks, which he indicated there will be because so many sick people will make coverage a priority.

So raw enrollment totals matter a great deal—and Laszewski is dubious that the exchanges will be able to reach a large enough total enrollment, given the limited patience insurers will have about keeping rates down.

Michael Hash, another HHS official, said during the press briefing that the size of enrollment is important, but so too is the age mix.

"We think that the marketplace requires that we successfully state by state enroll as many people as we can. The trends so far as we released in this report are suggestive of an appropriate mix in the marketplace, but again, to remind you, we are only halfway through the open enrollment period and we expect an increase in the proportion of young adults as we go forward," he said.

The report also included a state-by-state breakdown of enrollment totals. States with their own marketplaces appear in general to be amassing far greater enrollments than those served by the federal exchange website. The state of Florida, which has 3.5 million uninsured, reported that only 158,030 individuals have selected a plan.

The report contained additional details that HHS has not provided before. About 54 percent of the people who signed up were female and 46 percent were male.

So far, most people were choosing the least-expensive plans. About 20 percent of enrollees chose the bronze-level of coverage, which has the cheapest monthly premiums. Another 60 percent chose the silver level. People who sign up for silver-tier plans also are eligible for additional cost-sharing subsidies if their income is 250 percent of the federal poverty level or less.

By Emily Ethridge, CQ Roll Call

January 15, 2014 -- A bipartisan, bicameral group of lawmakers will soon announce the introduction of a bill to create Medicare plans to treat patients with chronic diseases, one of the program's biggest cost drivers.

Sen. Ron Wyden, D-Ore., a sponsor and the possible incoming chairman of the Finance Committee, said the measure would focus on providing better care and lowering costs, rather than cutting benefits or keeping Medicare as it is. Democratic Rep. Peter Welch of Vermont and Republicans Sen. Johnny Isakson of Georgia and Rep. Erik Paulsen of Minnesota also are sponsors of the measure.

The measure would create a new designation of a "Better Care Plan" (BCP) for providers to create coordinated care teams for Medicare beneficiaries with chronic conditions, according to a summary. Participating providers and plans would receive a risk-adjusted, capitated payment per enrollee. The Centers for Medicare and Medicaid Services (CMS) would determine that payment based on the cost of providing care for similar beneficiaries not enrolled in a BCP program.

The lawmakers said the BCP program would be superior to accountable care organizations, which also focus on coordinated care, for several reasons. For one, accountable care organizations (ACOs) are required to serve all beneficiaries seeking care, while providers in the BCP can target and enroll specific patients with chronic needs, and give them care before they become acutely sick.

In addition, ACOs participating in Medicare's typical fee-for-service system do not get more payments for coordinating care, and are eligible for shared savings only after a three-year period. The BCP program would give providers a set capitated payment per beneficiary.

CMS found that in 2010, 68 percent of Medicare beneficiaries had two or more chronic conditions and accounted for 93 percent of Medicare spending, or roughly $487 billion per year, the lawmakers noted in a release about the measure. The lawmakers said those beneficiaries also account for 98 percent of hospital readmissions.

The lawmakers may look to add the measure to "doc fix" legislation (S 1871, HR 2810) that would replace Medicare's sustainable growth rate physician payment system. Wyden and Isakson offered several elements of the bill as amendments to the legislation during a Finance Committee markup, but ended up withdrawing them.

Under the measure, the BCPs could lower a beneficiary's cost sharing for services that provide the best value for the patient's condition. In addition, each beneficiary in a BCP would receive an individual care plan.

The lawmakers said the bill would allow nurses and physicians to lead care teams, and use telemedicine and knowledge networks to provide better access to care in rural areas. It also would provide for changes in medical school curricula to prepare providers to respond to the needs of chronically ill patients.

By Melissa Attias, CQ Roll Call

January 16, 2014 -- Subsidies to help people buy health coverage on the new insurance exchanges begin flowing to insurers next week, a top official at the Centers for Medicare and Medicaid Services (CMS) recently told lawmakers.

In addition, Gary Cohen, director of the CMS Center for Consumer Information and Insurance Oversight, indicated that there might be a shortfall in funds collected from a 3.5 percent user fee paid by insurance companies and intended to be used to finance the operations of the federal exchange. Cohen testified at a hearing before the House Energy and Commerce Oversight Subcommittee on the rollout of the health care law (PL 111-148, PL 111-152).

In distributing the subsidy payments, Cohen said the administration is using a process based on insurers' records rather than records being generated by the federal insurance exchange, noting that making certain that plans are getting paid is a major issue for government officials.

He said that the automated process for payments is still being built and that he did not have information on an anticipated completion date, while emphasizing that they do have a working process in place.

"We've actually had tremendous responsiveness from the insurers and they've told us that they're very pleased with the way that process is going," Cohen said. "It's not ideal, but it will work to get them paid."

Cohen was also asked about the 3.5 percent user fee on insurance companies who participate in the federal exchange and whether other sources of funding would be needed.

"I don't believe that the amount of that fee will fully cover the costs of operating in the federally facilitated marketplace," Cohen said. He said that the agency is tapping resources within its own budget and he expects that there will be a fee next year as well, which CMS officials previously had predicted.

GOP lawmakers also honed in on testimony that was provided by Cohen to Congress prior to the start of open enrollment on Oct. 1 and pressed him for specifics on exactly what he knew when.

Subcommittee Chairman Tim Murphy, R-Pa., asked Cohen why he testified that the exchange would be ready on time. Murphy also brought up briefings on a report by the consulting group McKinsey & Co. that identified problems prior to the launch.

Cohen said he gave lawmakers the best information he had at the time but that the problems were dramatically bigger than anyone expected. He also confirmed that he attended the briefings and that a number of risks were identified, but he said that at no time did the firm say the effort would not succeed.

"I think we took very much to heart what the McKinsey people recommended that we do and we proceeded forward and tried to do the best we could to maximize the likelihood that we would be successful," Cohen said.

As to who on his staff gave him the positive outlook, Cohen said he received regular briefings from those responsible for overseeing the website and pointed to CMS Deputy Chief Information Officer Henry Chao as the person he probably heard from the most. He noted that his September testimony before open enrollment was based on briefings from Chao and others, though he said he did not know if Chao ever specifically saw the McKinsey report.

"Clearly it was wrong, but it was also what I believed and what I understood based on what I had been told," Cohen said about his September testimony, when pressed on the issue again by Texas Republican Michael C. Burgess.

Burgess maintained that he could not understand "why no one has been accountable for an error that egregious," suggesting that the administration now faces a credibility problem.

"Why should we believe you now when nothing you said over the past year, year and a half, has been accurate?" Burgess asked.
Tennessee Republican Marsha Blackburn told Cohen later in the hearing that she thinks he should be fired.

Burgess also expressed concern about the funding of the health care law's risk corridor program and asked if Cohen could assure lawmakers that it would not require more money from the taxpayers. Cohen said he did not currently have an answer but acknowledged it's an issue, adding that his agency is working with the Office of Management and Budget.

Meanwhile, subcommittee ranking member Diana DeGette asked what the administration is doing to bump up the enrollment numbers, both in terms of young people and the general population. The Colorado Democrat said in her opening statement that focusing on what happened last fall when everyone admits it was a disaster is not helpful.

Cohen said he expects to see a stronger media campaign, noting that the administration and insurance companies somewhat held back when the site was not working well. He mentioned an advertisement featuring Magic Johnson and said that there would be advertising during the Olympics, as well as through social media.

Also last week, House Speaker John A. Boehner told reporters that he expects Republicans to unveil a proposal to replace the health care law, in response to a question about why Republicans haven't gotten behind a plan of their own.

"The Republican House members will be having our retreat about a week and a half from now," the Ohio Republican said. "It's one of the big issues for conversation in terms of our agenda for this year. And I think you'll see Republicans come forward with a plan to replace Obamacare; a plan that will actually reduce costs for the American people and make health insurance more accessible."

Earlier this month, House Budget Chairman Paul D. Ryan, R-Wis., said in a Wisconsin radio interview that he plans to spend "a good deal of my time" this year developing a replacement plan. Members of the House Republican Study Committee have also been continuing to highlight a replacement bill (HR 3121) they introduced in September, which currently has 119 cosponsors.

By Kerry Young, CQ HealthBeat Associate Editor

January 16, 2014 -- A key panel of congressional advisers wrestled last week with how to make the most of accountable care organizations (ACOs), which are intended to improve the health of patients while squeezing out waste in medical care.

"We have moved away from consensus compared to our last conversation," said Glenn Hackbarth, the chairman of the Medicare Payment Advisory Commission (MedPAC).

He called this a "healthy sign" of how seriously panelists are considering any potential suggestions, such as whether ACOs might be asked to share in potential financial risks through a two-sided model, instead of only sharing savings, a one-sided model.

Still, the panel needs to quickly form a consensus in order to aid Medicare as it works on a new rule regarding shared savings through the Medicare Shared Savings Program for ACOs, he said.

"We do have a fixed time allotment to sort of come up with a view for the MSSP proposed rule, which will come out sometime in the next few months," Hackbarth said. "We have got some work to do."

ACOs are intended to give doctors, hospitals and other providers of medical care new incentives to shift away from the traditional Medicare fee-for-service model, and seek a more coordinated approach to health care that experts say could result in lower costs and better results.

MedPac staff recently raised concerns about a potential backlash from beneficiaries because people whose care falls under ACOs don't share in any savings if the organization succeeds in leveling out costs.

Rita Redberg, a panelist and a cardiologist at the University of California at San Francisco, noted that people whose care is arranged by ACOs may not see the increased coordination of care as a benefit. Although it's not always true, many people have the perception that more medical services mean better care, she said.

"The ACO doesn't have that kind of culture, but right now, the way it is structured, there isn't a lot in it for the beneficiary," she said, adding that it might help if people in ACOs could gain greater ease in communicating with their doctors.

MedPac members also noted that, as the system now stands, there are some obstacles to widespread participation in the ACOs.

Hackbarth said that ACOs might add tasks for which doctors are not compensated.

"Under the Medicare payment rules, Medicare doesn't pay for the email," he said. "It doesn't pay for the phone calls. So I have got to extort my physicians to do these things that they are not getting any compensation for."

By Melissa Attias and Emily Ethridge, CQ Roll Call

January 16, 2014 -- Congressional Democrats who suffered through the vexed rollout of the health care law's federal exchange late last year are feeling more optimistic, now that many initial website problems have been resolved by the Obama administration and enrollment numbers are growing.

But many Democrats also continue to work on finding fixes and improvements for the law, and some support Republican bills that would, for example, enhance the security of personal information provided to the exchange or delay penalties for not buying insurance.

The outlook is not bright for tinkering, though. Although rank-and-file Democrats may say they want to implement changes, Democratic leadership in both chambers has continued to oppose Republican attempts to alter the law. Lacking leaders' backing and the support of the White House, any legislation has slim chances of making it past the finish line.

With more than two months left of open enrollment in the law's exchanges, most Democrats say they support the overhaul and tout its progress—while also keeping an eye out for additional problems that are bound to crop up as millions of Americans begin to use their new health insurance.

"We're on the beachhead at Normandy. And it was a lot of concern that we weren't going to make it through," said Rep. Jim McDermott, D-Wash. "Now you're going to find a new set of problems as it goes into operation."

McDermott added, "We knew if we could get on the beach, we would—now we gotta take France and Germany."

When it comes to changes, though, congressional Democrats are divided about what—if anything—should be done. The stakes for Democrats may be especially high this year as lawmakers face the first congressional elections since the troubled rollout of the federal insurance exchange.

While their Republican colleagues continue to send out wave upon wave of press releases slamming the overhaul (PL 111-148, PL 111-152), Democrats are not as outspoken in their support—although many are highlighting the improved enrollment numbers and website functionality.

For their part, Republicans are planning to make the most of any vulnerable Democrats' support of the law. The Republican National Committee announced earlier this month that it was launching a radio ad campaign focused on Democrats "who lied to voters by telling them they could keep their healthcare plans under ObamaCare," according to a release.

"It's not possible for this not to be the No. 1 issue going into the 2014 elections—it's just not," RNC Chairman Reince Priebus said on a Jan. 7 conference call.

But many Democrats believe with website improvements, more people will gain benefits and have a positive experience with the law. McDermott and Jan Schakowsky, D-Ill., both noted how the enrollment process has recently improved in their states' exchanges.

"I'll tell you, since Jan. 1 it's been pretty good in our office," Schakowksy said.

Although the overwhelming majority of Democrats have voted against repealing the overhaul, a number of them have backed bills that would deal with possible security problems in the federal exchange website and expand access to plans and providers.

Sixty-seven House Democrats voted on Jan. 10 for a bill (HR 3811) that would require the administration to notify individuals within two days if their personally identifiable information has been compromised during a security breach of the exchange website. That's considerably up from the 39 Democrats who voted for a measure (HR 3350) in November that would allow insurers that provided coverage in the individual market as of Jan. 1, 2013, to continue to offer that coverage in 2014 outside of the insurance exchanges.

Rep. Ron Barber, D-Ariz., who supported both those bills, said he still has a lot of concerns about the security of the website. He introduced legislation (HR 3847) that would require the Department of Health and Human Services to comply with cybersecurity standards set by the Department of Homeland Security to ensure the privacy of information.

Barber said he might also offer the measure as an amendment to a larger cybersecurity bill the House Homeland Security Committee will consider in the next few months. But he said he supports moving forward with the law.

"I don't want to throw the good things out with the bad. I'd much rather fix the things that don't work," he said.

Barber said he would continue to vote "on principle" when it comes to the health care law, even though he got some pushback from constituents after supporting GOP bills to delay the law's individual mandate (HR 2668) and the employer mandate (HR 2667).

"A lot of Democrats were very upset about—back home—upset that I somehow deserted the ACA," he said. "For me it was a matter of principle."

In the Senate, Tim Kaine of Virginia expects to continue to have discussions with an informal group of lawmakers from both parties who are interested in making improvements to the law. He said he had talked with between 12 and 20 members of Congress.

"I just think every day there is more of a reform constituency," he said.

West Virginia Democratic Sen. Joe Manchin III is one of those who believe implementation should continue but that Congress should respond to any problems. He mentioned his bill (S 1671) with Illinois Republican Sen. Mark S. Kirk to delay the law's penalty for a year for those without individual insurance coverage.

"If it doesn't work, in certain parts of it, then you have to move. And that's a transitional year without any fines or crimes applied to it," he said.

McDermott also has introduced two bills that he said would make small technical fixes to the law. One (HR 3833) would allow nurse practitioners, physician assistants, and clinical nurse specialists to certify face-to-face encounters with beneficiaries to verify eligibility for Medicare home health services. The other (HR 3832), he said, would close a loophole to help stop waste, fraud and abuse.

Not all Democrats, however, see the need for additional legislation. Schakowsky said that cooperation from pharmacies and insurance companies has helped smooth over some enrollment issues. "I think that to somehow do a legislative fix at this point would be at worst premature and at best not really necessary," she said.

McDermott said that although Republicans may try to continue their efforts to repeal or dismantle the bill, Democrats would defeat them. "We're on the beach. They ain't gonna throw us off," he said.

By Rebecca Adams, CQ HealthBeat Associate Editor

January 17, 2014 -- Tax prep companies are predicting that February and March may bring more sign-ups for the marketplace health insurance plans, not only because of the approaching end to the open-enrollment period but also because low-income people may have more money due to tax refunds.

On Jan. 31, the federal income tax filing season will begin. This year, the Internal Revenue Service (IRS) is expected to distribute at least an estimated total of $325 billion in income tax refunds.

One former state government health policy official who now works for a tax prep service says enrollment was lower than it could have been in the fall not only because of technical problems with marketplace websites but also because families who need insurance did not have a lot of extra money lying around.

"One of the most important opportunities for the federal government is to leverage that huge injection of liquidity into taxpayers' pockets," said Brian Haile, senior vice president for health care policy at Jackson Hewitt Tax Service. "When you think about how to get uninsured people into coverage, it's even better when they've got the cash to buy it. The thing that drives me to distraction is the idea you'll be able to compete with Christmas. Nobody's gonna buy it then."

Haile estimates that as many as 90 percent of uninsured households will get refunds.

The average federal income tax refund in the United States was $2,860 in late 2013, according to IRS statistics. People who file earlier in the year tend to have the highest refunds, the data show, because people who will get money back are motivated to file early.

Most tax filers get refunds, according to other IRS statistics. Data from fiscal 2012 showed that more than 80 percent of individual income tax returns generated a refund. A separate breakdown of 2011 tax returns by income categories shows that the vast majority of households with income under $250,000 get refunds, with the percentage getting refunds dropping off a bit as income rises above that amount.

The theory that tax refunds could spur more enrollments is interesting, said Bob Williams, a fellow at the Tax Policy Center, an initiative run by the Urban Institute and the Brookings Institution. But he said that it's not certain how many people who are uninsured will get a tax refund that would put more money in their pockets to pay for insurance.