By John Reichard, CQ HealthBeat Editor

Rep. Raúl M. Grijalva of Arizona and 41 other House Democrats have written a letter to top Department of Health and Human Services officials urging them not to grant waivers to states permitting them to reduce Medicaid coverage levels beyond their right to do so under the health law.

"We write today to reaffirm congressional intent for the Patient Protection and Affordable Care Act 'maintenance of effort' (MOE) provision," the lawmakers said in the June 27 letter.

The MOE provision of the health law requires states to maintain "eligibility standards, methodologies and procedures" for adults on Medicaid until 2014 when state health insurance exchanges start, and for children on Medicaid through 2019. The MOE rule also applies to states' Children's Health Insurance Programs through 2019.

The health law does permit states meeting certain criteria to obtain waivers from the MOE. Supporters of the current Medicaid program worry that the Centers for Medicare and Medicaid Services will go even further and grant waivers that don't meet the criteria. They note that the federal government is under pressure from many states to let them do more to chop Medicaid spending.

Medicaid advocates also worry that the criteria for exemptions will be eased in debt ceiling negotiations, says Bruce Lesley, president of First Focus, a children's health advocacy organization.

The letter from the House Democrats states that "it is imperative that this [MOE] language is enforced to the strict standard intended by Congress and that it is made clear that waiving this section is not permitted unless the waiver request meets" certain explicit criteria, they added.

The health law permits a state to file for an exemption from the MOE if it certifies that it has a budget deficit; seeks the exemption for adults not eligible for Medicaid on the basis of pregnancy or disability; and seeks it for adults whose incomes are above 133 percent of the federal poverty level.

Grijalva's communications director, Adam Sarvana, says Arizona is seeking a waiver to drop coverage for populations not meeting the three requirements. He expects other states to do so as well, and the letter is a reminder to CMS to stick to the law, Sarvana said.

As it is, a number of states appear to potentially qualify for exemptions under the three criteria. According to the Kaiser Family Foundation, 22 states provide at least some Medicaid coverage to non-pregnant, non-disabled adults with incomes above 133 percent of the federal poverty line.

These states haven't filed waiver requests under the exemption criteria thus far, but that could quickly change. "This is likely because a reduction made prior to July 1, 2011 would result in a loss of the ARRA enhanced matching funds," the Kaiser Family Foundation said in an analysis of the MOE requirements. But those extra federal Medicaid payments that were provided under the 2009 economic stimulus law are now no longer available—which suggests that exemption requests may soon be arriving.

By Jane Norman, CQ HealthBeat Associate Editor

Americans appear to have more confidence in the ability of an independent panel to trim Medicare spending than they have in bureaucrats, politicians or insurers, according to a new poll released by the Kaiser Family Foundation.

Among those surveyed in the June poll, half said they would trust "a fair amount" or "a great deal" an independent panel of full-time experts with members appointed by the president and confirmed by the Senate.

About 40 percent would instead place their trust in the Centers for Medicare and Medicaid Services, 34 percent in Congress and 34 percent in private health insurance companies.

A Kaiser analysis notes that when it comes to trust, no one group gets an "overwhelming" level of support, but the independent board beats the other choices. Broken down by party identification, Democrats trust an independent panel more than Republicans, who say they are more likely to trust insurers.

Overall, 31 percent said they would trust Congress "not at all" to make proposals about Medicare spending, and 33 percent said they would trust Congress "just a little."

The poll results come as debate intensifies over the role of the Independent Payment Advisory Board, which was created in the health care law (PL 111-148, PL 111-152) and is intended to issue by 2014 recommendations about how Medicare spending has reduced.

Under the law, starting in 2014, IPAB will have the power to issue recommendations to reduce Medicare spending if it exceeds certain levels. Congress can block the board's recommendations from taking effect, but it is not easy to do so.

Republicans have been stepping up their criticism of the board for having too much power and too little oversight, as have health advocacy organizations. A GOP bill to repeal IPAB (HR 452) has picked up 144 cosponsors, including seven Democrats.

The Energy and Commerce Subcommittee on Health has scheduled a July 13 hearing on IPAB's "controversial consequences for Medicare and seniors."

Also in the poll, those surveyed said that they would prefer spending reductions instead of tax increases as a main approach to reducing the deficit, with about 47 percent saying that is preferable. Just 16 percent said they liked tax increases as a better alternative.

The question is an important one given current tension-filled negotiations over reducing the deficit in time to raise the debt ceiling by an Aug. 2 deadline.

But an analysis of the poll pointed out that previous surveys have found it is much more difficult to find agreement among members of the public when it comes to specific areas of spending that could be cut. In the May tracking poll, majorities said they would not accept any reductions in spending on Social Security, Medicare or Medicaid.

The June poll asked a somewhat different question: whether people would be willing to accept Medicare reductions for specific purposes. It found 45 percent said they would back "minor" cuts to trim the deficit, and 18 percent said they would accept "major" reductions.

There was more support for using the money saved for the Medicare program rather than another purpose. To prevent Medicare from going bankrupt, 42 percent would accept minor reductions and 32 percent would accept major reductions. Similarly, to prevent a Medicare funding shortfall, 49 percent would accept minor reductions and 23 percent would accept major reductions.

Kaiser also regularly asks about people's view of the health care law and found little had changed in June compared to previous polls—42 percent hold a favorable view and 46 view it unfavorably, with partisan lines drawn in the responses. The unfavorable view had increased slightly from 44 percent in May.

The poll was conducted June 9 through June 14 among a nationally representative sample of adults age 18 and older, using both land-line telephones and cell phones. The margin of error is plus or minus 3 percentage points in the total sample and may be higher among subgroups.

By Jane Norman, CQ HealthBeat Associate Editor

Lawmakers may be eyeing public programs like Medicare for cuts in their debt ceiling talks, but beneficiaries already are shouldering a substantial portion of their own health spending.

That's the conclusion of a series of reports issued by the Kaiser Family Foundation on Tuesday that try to put the faces of beneficiaries back in a debate focused more on the larger puzzle of how to extract more than $2 trillion in savings from the federal budget. Congress has an Aug. 2 deadline to raise the debt ceiling.

The picture of Medicare enrollees painted by Kaiser is of a population in modest circumstances. Half of all people on Medicare had incomes below $22,000 in 2010; fewer than 1 percent had incomes of more than $250,000, Kaiser says in reports based on government data and economic modeling. Among the findings:

• Half of all beneficiaries have less than $2,100 in retirement account savings, such as IRAs, and half have less than $31,000 in other financial assets such as bank accounts. Five percent have combined savings of more than $1 million. White seniors have significantly more in savings than black seniors.
• Half of the people on Medicare had less than $60,000 in home equity in 2010. The average home equity was about $132,000 in 2010.
• Medicare beneficiaries spent three times as much of their income on health expenses than people not on Medicare, Kaiser found. For Medicare recipients, that amounted to 15 percent of their household budgets.
• Much of that money goes to the cost of health insurance premiums, including premiums for Medicare Part B and Part D and supplemental insurance coverage. Other big health costs are long-term care that's not covered by Medicare, medical providers and supplies and prescription drugs.
• Health spending as a share of average Medicare household spending increases with age, rising for seniors 80 and older. It's also high for people in poor health or with low or modest incomes who aren't poor enough to qualify for Medicaid.

The health care law (PL 111-148, PL 111-152) contained some provisions aimed at helping people on Medicare, including the closing of the Part D prescription drug "doughnut hole." But it's important to fully assess the impact of Medicare cuts on out-of-pocket spending by seniors who already live on tight budgets, says one report, which was based on data from 1997 to 2006. One in four beneficiaries spent 30 percent or more of their income on health expenses in 2006, and one in 10 spent more than half of their income paying for health care, the report said.

With household incomes rising more slowly than health care costs, out-of-pocket expenses consume more and more of seniors' incomes, Kaiser says. Supplemental coverage helps, but the cost of those premiums is rising as well.

"As policymakers consider options to rein in federal spending, including proposals that would increase costs for some or all people on Medicare, this analysis raises important questions about how much—and how much more—of their incomes Medicare beneficiaries can be expected to spend on their health care," the report says.

At a panel discussion sponsored by Kaiser, health expert Gail Wilensky, who served under a Republican president as head of the agency that preceded the Centers for Medicare and Medicaid Services, said the notion of trying to stabilize Medicare for the long-term has been around long before the debt ceiling discussions. Rising health care costs and the aging baby boomer population have made it worse, she said.

The health care law didn't go far enough in making changes in Medicare that would revamp the delivery system, she said, and it's questionable whether the law's Medicare provider cutbacks will ever be enacted.

Yet the notion of spending reductions was embraced in a "not very explicit way" by Democrats in the health care law and by House Republicans "in a very explicit way" in their budget, Wilensky said. That budget, authored by Budget Chairman Paul D. Ryan of Wisconsin, proposed that people younger than 55 be required to pick their insurance from a menu of alternatives, using a set sum allocated by the government.

Wilensky pointed to the creation of the Independent Payment Advisory Board as Democrats' indirect way of demanding cuts.

"What has happened is that both parties have just embraced this very different concept of Medicare without talking about if we were going to limit spending, how should we do so," she said.

Wilensky mentioned a "modified Ryan plan" and the Federal Employees Health Benefit Program in the same breath—prompting a rebuke from another panelist, Bruce Vladeck, a senior adviser to Nexera Inc. who was in charge of Medicare for President Bill Clinton.

"It's just one of those sound bites that distorts the debate. I'm sorry. It's not at all alike," Vladeck said.

Wilensky said she'd back a modified Ryan plan but added, "I do not support the Ryan plan as was stated."

By John Reichard, CQ HealthBeat Editor

Pause for a moment and enter the arcane world of electronic health care transactions—things like checking on whether a patient is covered by a health plan or determining the status of a patient's insurance claim.

In the realm of these and other transactions in the doctor's office involving the staff and the patient, or the staff and a health plan, federal law already requires that certain standards be followed. Thus, for example, the electronic claims-handling systems of health insurers must tell a doctor's office whether a patient is enrolled in a particular plan.

But there is no consistent way in which plans must meet this eligibility standard. For that to occur, operating rules are needed to specify what information an insurer would have to give in notifying a doctor's office that a patient is covered by the plan.

The information from the insurer could consist of a simple "yes," or the insurer could provide something more, such as saying how much the patient has to cough up as a co-pay for the visit to the doctor, or how far he or she has gone to meet the plan's deductible.

The distinction between a standard and an operating rule may seem unimportant, but adopting the latter will save billions, Centers for Medicare and Medicaid Services officials announced in a press briefing.

Specifically, two operating rules CMS is mandating under the health care law (PL 111-148, PL 111-152) will save $12 billion over 10 years, officials said. The rules pertain to patient eligibility and claims status. This marks the first time CMS has required operating rules under the federal standards for electronic health care transactions.

"This is, out of the gate, a $12 billion savings over the next decade," said Denise Buenning, director of the Administrative Simplification Group at CMS. "As we proceed with the development of additional administrative simplification regulations as a result of the Affordable Care Act, we will obviously add on to that total. We will be adopting additional operating rules as we go forward."

"The operating rule just gives you a little more specificity as to how exactly to format" information, she added. Thus office staff saves time from no longer having to figure out the different ways individual health insurers want them to input information.

CMS says insurers and providers will save time and money and doctors will have more time to spend on patient care, officials said. And patients will be served because they'll know on the spot what they have to pay out of pocket or whether their deductible has been met.

But there are costs involved. Health plans will have training, equipment and software costs ranging from $2.5 billion to $5 billion over 10 years to comply with the two rules, and providers will have costs ranging from $400 million to $800 million. But the savings of up to $12 billion is the net of those costs.

By John Reichard, CQ HealthBeat Editor

Mark McClellan, the former Centers for Medicare and Medicaid Services administrator who is leading a concerted effort to spawn the growth of accountable care organizations, said that he expects Medicare officials to ink the first Medicare ACO contracts next spring.

McClellan said the intense criticism of the ACO regulation proposed by CMS last March only shows how serious doctors, hospitals, and other providers are about creating the new organizations. The health overhaul law (PL 111-148, PL 111-152) envisions these groups as bringing more efficient, team-based care to the traditional Medicare fee-for-service program.

"I think the storm of criticism is an indication of how much it matters" to providers and other organizations, McClellan said of the proposed rule.

Critics have called the proposal unworkable and noted that cutting-edge health systems aren't seeking ACO status. But it would be a mistake to think the ACO program is a clunker and won't go anywhere, McClellan said in a brief interview after launching a two-day ACO "summit" meeting in Washington, D.C.

"The fundamental need for those reforms, ACO reforms, is not going away," he said in his opening remarks.

Health and Human Services officials have said they will launch the Medicare ACO contracting program in January. McClellan says he thinks it actually will be spring of 2012 before the first contracts are signed. CMS must make final its proposed regulation after evaluating some 1,200 comments. Once the rule is finalized, the agency will have to issue "sub-regulatory guidance" to provide health industry officials the application forms and guidance they will need to formally apply, McClellan said.

Applicants will need time to have lawyers review the applications, including for antitrust compliance, he said. And then CMS will need time to scrutinize the applications, he noted.

McClellan said currently there are about 100 ACOs operating now outside of Medicare, up from about 50 a year ago. He may know more about ACO activity than anyone; his Engelberg Center for Health Reform at the Brookings Institution has created a learning network to give organizations access to the many resources they will need to form ACOs.

McClellan expects many more ACOs to get off the ground next year. He is talking about ACOs of all kinds when he makes that prediction—those in the private sector, in Medicaid, and in Medicare.

McClellan said he sees various forms of innovation in the private and public sector feeding off of each other. Thus "medical home" programs to give the chronically ill access to doctor's offices that closely monitor their care will eventually apply for status as ACOs. And ACOs will seek status as medical homes, he said.

HHS officials who spoke at the meeting seemed determined to be upbeat—and grateful to McClellan, a key health official in the Bush administration, for his efforts outside CMS to promote ACOs. There hasn't been much in the way of praise for ACOs lately.

"His leadership in helping to develop this model is really welcome," HHS Secretary Kathleen Sebelius said in the summit's keynote address.

Sebelius acknowledged all the criticism of the proposal but expressed confidence that the final rule would find the right balance between the necessity to make real change in how health care is delivered and the resources organizations can realistically provide to start down that path.

She said attendees could take some encouragement from the five-year Physician Group Practice Demonstration program at CMS. The 10 group practices involved made improvements in the quality of care and six of the 10 group practices generated savings totaling $80 million, she said.

Providers and CMS now know more about ACOs and private payers are experimenting with ACO models, she said. That adds up to growing know-how that will deliver better results from the Medicare ACO contracting program than in the CMS demo, she predicted.

The adoption of information technology that will make it easier to run ACOs is beginning to accelerate, she said. "At some point there will be a tipping point and the market will absolutely take over" in terms of providers having to have IT to compete, she said.

Deputy CMS Administrator Jonathan Blum showed no signs of being defected by the hundreds of critical comments of the proposed ACO reg. He said he was "pleased and heartened" by the comments and the energy they reflected. He said the proposal should engender strong comment because its aim is to change the delivery of treatment in the Medicare program.

Blum also predicted strong participation in a "pioneer ACO" program CMS is launching later this year for a select group of organizations that are ahead of the curve in organizing care and will get started before regular ACO contracting program launches.

But not all the talk from HHS officialdom was necessarily rosy. Sebelius had a bit of a warning too for potential applicants. "Accountable care organizations cannot just be the status quo with a new name," she said.

By John Reichard, CQ HealthBeat Editor

At a time when some debt ceiling negotiators are considering charging wealthier Americans more for Medicare, two senators not directly involved in those talks unveiled a variety of suggested program changes that would involve affluent Americans paying more—raising the possibility that some of their ideas could find their way into a debt ceiling deal later this summer.

Senators Joe I. Lieberman, I-Ct. and Tom Coburn, R-Okla., want lawmakers to swallow the whole smorgasbord of changes they laid out last week. Their package projects savings of $600 billion over 10 years and, they say, would provide an additional 30 years of solvency for the Medicare hospital Part A Trust Fund. It also would mean a three-year postponement of any sharp cuts in Medicare payments to doctors.

The proposal is probably far too controversial to pass as a whole package anytime soon. But to the extent debt ceiling negotiators are influenced by the plan, they may sample here and there from its many components.

"We can't save Medicare as we know it. We can only save Medicare if we change it," Lieberman said at a press conference. The proposal does keep Medicare as a federal entitlement program. Lieberman opposes Republican "premium support" proposals that would privatize Medicare.

Coburn had been one of the toughest fiscal hawks in the Gang of Six, a bipartisan group of senators working on a deficit reduction proposal. He quit the group last month, expressing pessimism about the prospects of reaching a bipartisan agreement. Coburn also was a member of President Obama's deficit commission and voted for the group's proposal.

Lieberman and Coburn's plan is of particular interest in light of statements made by Sen. Jon Kyl of Arizona, a key Republican involved in debt ceiling negotiations. He expressed an interest in means testing Medicare benefits and in raising the Medicare eligibility age to match that of Social Security.

The Lieberman/Coburn plan does that, among a number of other things. Their package calls for:

• Higher Part B premiums for the wealthy. Premiums for Medicare Part B, which covers doctor care outside the hospital, would rise so that individuals making more than $150,000 a year or couples making more than $300,000 a year would pay 100 percent of the costs of their Part B coverage. Premiums in general now cover 25 percent of Part B costs. Estimated savings: $5 billion to $10 billion over 10 years.
• Higher Part D premiums for the wealthy. Lieberman and Coburn estimated that monthly premiums for Part D Medicare prescription drug coverage pay only 11 percent of the costs of the program. Charging individuals making more than $150,000 annually and couples making more than $300,000 per year 100 percent of their premium costs would save $5 billion to $10 billion over 10 years.
• Raise the eligibility age. The plan would increase Medicare's eligibility age by two months every year starting with people who were born in 1949, who will turn 65 in 2014, until the threshold reaches 67 in 2025. Insurance options and subsidies in the health care law (PL 111-148, PL 111-152) will permit those above age 65, too young to qualify for Medicare access, to coverage through state-based insurance exchanges. Estimated savings: at least $124 billion over 10 years. If the health care law were repealed the eligibility age would remain as it is now, with people qualifying for Medicare when they turn 65.
• Restructure cost-sharing. The plan would establish a single combined annual deductible of $550 for both Part A and Part B services. The senators believe a single deductible would help reduce overuse of services. They would overhaul supplemental "Medigap" coverage that picks up many of the costs Medicare does not. Policy holders with this supplemental coverage use an estimated 25 percent more services than other beneficiaries. Medigap would be revamped to establish minimal cost-sharing for all Medicare services to prevent unnecessary use of treatment resources. To protect beneficiaries from having to pay too much out-of-pocket, those expenses would be capped at $7,500 a year on average, although individuals with incomes between $160,000 and $213,000 would have an out-of-pocket cap of $22,500. The net impact of these changes would save $130 billion over 10 years.
• Phase out Medicare payments for bad hospital debts. Medicare now reimburses hospitals and other providers for deductibles and co-payments not paid by beneficiaries. The new out-of-pocket caps should reduce the need to reimburse hospitals for bad debt. Savings: $23 billion over 10 years.
• Lower home health payments. "Productivity adjustments" starting in 2013 and payment "rebasing" starting in 2015 would save $9 billion over 10 years.
• Increase Part B premiums for Medicare beneficiaries. On average, beneficiaries pay 25 percent of premium costs. Their plan would increase that by two percent of Part B program costs every year for five years until beneficiaries on overage were paying 35 percent of premiums costs (the wealthy would pay more as noted above). A "hold harmless" provision would remain in effect that prevents a Part B premium increase in a given year from exceeding the Social Security annual cost-of-living adjustment. Savings: $241 billion over 10 years.

The two senators say the plan also would block a 30 percent cut in doctor payments scheduled for Jan. 1, 2012 from taking effect for three years. The cost of that fix over the three year period would be $40 billion (although the 10-year cost would be $275 billion).

An advocacy group representing Medicare patients said the proposal would harm beneficiaries.

Medicare Rights Center President Joe Baker said "it's not over-utilization caused by patients that is the problem—it's the prices." Baker added that so-called benefits simplification proposals "are scary because the allure of an out-of-pocket limit could blind patients, their caregivers and policymakers to the facts: these proposals save the government money by making patients pay more or making care so unaffordable that they just don't get it in the first place."

Baker added in a statement that "the vast majority of Medicare consumers would never benefit from the out-of-pocket limit because it is set far too high—$7,500 in the Lieberman-Coburn proposal. In fact, for most people with Medicare, out-of-pocket costs would increase because cost-sharing would apply where none existed before, like for home health care, and they would lose Medigap coverage of portions of their coinsurance and deductibles. This increase in out-of-pocket health costs would be a financial tipping point into poverty for many older Americans and people with disabilities, who on average already spend 15 percent of their income on health care."