By Alex Wayne, CQ Staff

September 7, 2007 -- The Bush administration on Friday rejected a request by the state of New York to expand subsidized children's health insurance to middle-income families, further inflaming a fight with Congress over the program.

New York requested permission from the government in April to expand its State Children's Health Insurance Program (SCHIP) to cover children from families earning up to four times the poverty level, or $82,600 for a family of four. Eligibility for the program in New York is currently limited to families earning 2.5 times the poverty level or below, or $51,625 for a family of four.

The Bush administration has previously approved similar expansions in other states, allowing them to cover children from families earning up to 3.5 times the poverty level. But New York's has been the largest proposed expansion to date, and comes as congressional Democrats have passed bills that would renew and expand SCHIP, against opposition from Bush and some Republicans.

The administration has been pushing back against Democrats' SCHIP expansion plans in several ways. Bush has threatened to veto both the House (HR 3261) and Senate (HR 976) versions of the expansion. And on Aug. 17, the Centers for Medicare and Medicaid Services (CMS) sent state health officials a letter imposing new limitations on state attempts to expand SCHIP on their own.

Friday's rejection of New York's request is seen by Democrats as yet another attempt by Bush to stymie the program's expansion.

"It is clear the administration is spoiling for a fight and it's unfortunate he has chosen children's health care," Ways and Means Chairman Charles B. Rangel, D-N.Y., said in a statement Friday.

The acting CMS administrator, Kerry Weems, said in a letter to New York's Department of Health that its expansion request was being rejected based on the Aug. 17 letter to state health officials. Among other things, according to the letter, the administration will now require states to assure that they have covered 95 percent of children from families earning less than double the poverty level before they will be allowed to expand SCHIP to cover children from more affluent families. The state has "failed to provide" that assurance, Weems wrote.

"New York has not demonstrated that its program operates in an effective and efficient manner with respect to the core population of targeted low-income children," he wrote, meaning children under twice the poverty level.

The state has 60 days to ask CMS to reconsider its request. By then, Congress may have changed the legal landscape.

SCHIP will expire Sept. 30 without congressional action. Before the end of the month, Democrats hope to agree on a compromise SCHIP renewal that will expand the program by at least $35 billion over the next five years, to $60 billion, and that will explicitly increase eligibility to children from families earning up to three times the poverty level.

Democrats say they also will include language in the SCHIP renewal, in a temporary extension of the program, should it be necessary, or in other legislation that will nullify the Aug. 17 regulations that the administration issued. State health officials say many of the new requirements outlined in the Aug. 17 letter are impossible to meet, and some legal experts say the instructions are illegal.

The regulations in the letter were not subject to official notice or comment periods, which are required for formal administrative rulemaking. In an opinion provided to congressional Democrats, the chairwoman of George Washington University's health policy department, Sara Rosenbaum, said the administration's Aug. 17 letter appears to lack "the force and effect of law and should be set aside."

The letter's regulations violated both the original SCHIP law (PL 105-33) and the Administrative Procedures Act, which guides federal rulemaking, she said.

"We have an opportunity when we pass the conference report [on an SCHIP renewal] to basically negate" the Aug. 17 letter, said Rep. Frank Pallone Jr., D-N.J., who chairs the Energy and Commerce subcommittee on Health and helped write the House version of the renewal.

Jeff Nelligan, a spokesman for CMS, defended the letter and its use as justification for denying New York's request. "We are confident that we have the legal authority and acted appropriately in using it," he said.

By Alex Wayne, CQ Staff

September 6, 2007 -- Leading House Democrats said Thursday that they will negotiate compromise children's health insurance legislation informally with their Senate counterparts if Senate Republicans continue to block a formal conference committee on the bill.

House Democrats held a rally with labor union activists on Thursday intended to pressure both President Bush and the Senate to act quickly on a renewal of the State Children's Health Insurance Program (SCHIP), which covers more than 6 million low-income children.

Both chambers have passed bills to renew the program, which expires Sept. 30. But Senate Republicans have blocked the appointment of senators to a conference committee that would negotiate a final bill, saying they want an agreement to limit the bill's scope and expense before a conference convenes.

The House bill (HR 3162) is broader and more expensive than the Senate version (HR 976).

"If they're going to block it," said Rep. Pete Stark, D-Calif., chairman of the Ways and Means Health Subcommittee, "I think we get together and we get a plan."

"It won't stop us from coming to an agreement on our own in the next few weeks," said Rep. Frank Pallone Jr., D-N.J., chairman of the Energy and Commerce Health Subcommittee.

Both men, who helped write the House bill, said after Thursday's rally that they would prefer a formal conference. But one alternative, they said, is for House and Senate Democrats to agree informally on a compromise bill on their own, then approve it in a brief conference at the end of the month if Senate Republican opposition can be overcome.

Another alternative is a short-term extension of SCHIP, perhaps to Nov. 15, Stark said.

"I'd have no objection" to an extension, he said. He said Congress has only nine legislative days before the end of the fiscal year, when the program expires, to clear a conference report for President Bush—who has threatened to veto either the Senate or House versions of the legislation.

The Senate version is much more bipartisan than the House bill; it passed 68–31 on Aug. 2, enough to override a veto. The House bill passed 225–204 on Aug. 1, far short of the two-thirds necessary to overcome a veto.

But each bill has provisions that are objectionable to many members in the opposite chamber. The House bill includes a nearly $50 billion expansion of SCHIP, to $75 billion over the next five years—about $15 billion more than the expansion the Senate approved. The House bill also would cut payments to insurers who participate in Medicare Advantage, a Republican-championed program in which insurers provide benefits to seniors in place of the government. Medicare Advantage has greater support in the Senate.

The Senate bill, however, includes a larger tobacco tax increase than the House bill. The Senate bill would raise the cigarette tax by 61 cents, to $1 per pack, 16 cents more than the increase the House approved. Some House Democrats voted against the House bill because of its tobacco tax increase, and the bill would likely lose additional Democratic votes if the tax were increased further.

By Drew Armstrong, CQ Staff

September 3, 2007

Bills: HR 4, S 3

Outlook: With a presidential veto threat and other health-related legislative priorities filling the legislative calendar, Congress is not likely to clear a bill this year that would give the government power to negotiate Medicare drug prices.

Synopsis: Since the Medicare drug benefit (PL 108-173) was enacted in 2003, Democrats have argued that the prices of drugs covered in the program could be lower if the government were allowed to negotiate with providers. Changing the law to provide that bargaining power was part of the Democratic majority's agenda this year. The House passed its bill in January, but work in the Senate has stalled, and veto threats by the president have left lawmakers reluctant to continue.

House Democrats passed their bill within a week of its introduction. The legislation would require the Health and Human Services Department to negotiate drug prices on behalf of the many private plans that administer the Medicare drug benefit. The House plan would not, however, allow a formulary—an exclusive list of drugs that negotiators could use as leverage to win lower prices from drug makers.

Critics of the plan have said that without a formulary, the proposal would not actually save the government money. The Congressional Budget Office backs up their claims. In a Jan. 10 letter to House Energy and Commerce Chairman John D. Dingell, D-Mich., CBO said the bill "would have a negligible effect on federal spending." To get real savings, lawmakers might have to write in a formulary or some other type of negotiating leverage.

In the Senate, the Finance Committee backed off further from the House version, writing a less-stringent bill that would allow government negotiation but would not require it.

Absent a negotiating requirement, the Senate bill includes what may remain a potent and politically achievable tool: It would require private companies that run drug coverage plans to turn over cost and price data to Congress. Lawmakers might then use that information to make a future case for government negotiation if they could show that private plans were not reducing prices sufficiently.

The bill never came to a vote on passage, however. Republicans blocked it by defeating a motion to invoke cloture, or end debate, on a motion to proceed to the bill. Supporters came up five votes short of the 60 needed to continue work on the measure. Lawmakers in both chambers have made no indication that they plan to take up the stalled bill again this year.

By Lauren Phillips

September 7, 2007 -- Low-income people enrolled in Medicare private fee-for-service plans and living in poorer counties pay more for their health care than those enrolled in the same plans in neighboring, more affluent areas, according to a new study from the Medicare Rights Center.

The report, which compares U.S. Census Bureau demographics data with plans' premiums and benefit packages in eight counties in four states, cites examples where Medicare private fee-for-service plans in affluent counties receive greater federal subsidies per enrollee than those in nearly poorer counties where more minorities live. For example, Ohio's fairly affluent Clermont County has no monthly premium for a private health plan, but the same plan's premium is $69 in neighboring county that has twice as many people living in poverty.

"Current members of Congress and the insurance lobby have been working overtime to sell the argument that overpaying insurers is in the best interest of poor and minority Americans," the center's president, Robert M. Hayes, said in a news release. "But it is a misleading, untruthful strategy to keep the overpayments to Medicare private health plans flowing."

Payments to private plans, known as Medicare Advantage (MA), now average 112 percent of traditional rates, according to the independent Medicare Payment Advisory Commission (MedPAC). The commission, which is on record as supporting the Medicare Advantage program, has repeatedly recommended equalizing payment levels between Medicare Advantage and traditional Medicare.

Centers for Medicare and Medicaid Services (CMS) Spokesman Jeff Nelligan said the agency was "uncertain how representative eight counties are of a nation containing more than 3,140 counties." He said the Medicare Advantage program offers a wide variety of premiums across the country with a significant number of beneficiaries, including those with low-incomes, having the choice of a zero premium plan.

Nationally, 27 percent of Medicare Advantage beneficiaries are minority versus 20 percent of traditional Medicare fee-for-service beneficiaries, Nelligan said, and that on average beneficiaries who choose Medicare Advantage plans receive over a $1,000 a year in benefits not available in the traditional fee-for-service program.

Mohit Ghose, a spokesman for America's Health Insurance Plans (AHIP), said studies such as the Medicare Rights Center report "do not represent the reality for millions of beneficiaries who depend on Medicare Advantage plans for better benefits and lower out-of-pocket costs. We know from CMS data that 49 percent of MA beneficiaries have incomes below $20,000. MA plans remain the most popular option for beneficiaries with incomes between $10,000 and $20,000 who are less likely to have access to Medicaid or employer-sponsored coverage."

By Mary Agnes Carey, CQ HealthBeat Associate Editor

September 7, 2007 -- Reductions in Medicare physician payment rates would not only restrict beneficiaries' access to physician services but will also cause staffing reductions in doctors' offices, according to a new survey from the Medical Group Management Association (MGMA).

Unless Congress acts, Medicare payments to physicians will be cut by about 10 percent January 1. The House version of legislation (HR 3162) to reauthorize the State Children's Health Insurance Program (SCHIP) would reverse that cut and increase physician payments over the next two years. The Senate SCHIP measure (S 1893) does not address the physician payment issue.

In the MGMA survey, more than 41 percent of respondents said they may have to limit the number of Medicare patients they see if Medicare reimbursements are reduced and more than 19 percent said they would not accept new Medicare patients. In addition, 57 percent of physicians who responded to the survey they would have to reduce staff health care benefits coverage to remain financially viable and 44 percent would cut administrative staffing levels. A third of respondents said they would cut clinical staffing levels and 9 percent would cut the number of physicians in their practice.

Of additional concern to MGMA members, the poll also indicated that nearly 63 percent of respondents said private insurance companies with which they had contracts made changes to their 2006 payment rates based on the Medicare fee schedule, which froze Medicare reimbursements. Of those practices, 51 percent experienced up to a 5 percent reduction; 22 percent experienced up to a 10 percent reduction, and nearly 9 percent experienced up to a 25 percent cut.

"Beyond the impact on practices with higher Medicare-beneficiary patient populations is the domino effect these payment cuts will have when private payers follow suit and reduce their payments across the board," said William Jessee, MGMA president and chief executive officer. "Even practices that have already restricted their Medicare patient volume will feel the pinch."

MGMA conducted its Medicare access questionnaire in July, six months after Medicare reimbursements to physicians were frozen and six months before the impending decrease would take effect. MGMA collected responses from more than 631 members, representing 13,686 practicing physicians.

A survey released earlier this year by the American Medical Association (AMA) found that 60 percent of the group's members said they would limit the number of Medicare patients they see if the proposed 2008 Medicare cuts become law.

By Alex Wayne, CQ Staff

September 6, 2007 -- Supporters of legislation that would speed up insurer payments to pharmacies under Medicare's new drug benefit are hoping to pass their bill by Thanksgiving.

But so far, House leaders haven't placed the popular measure (HR 1474), which has 199 cosponsors, on the fall schedule.

"Really, more than anything else, it's just been hard to get the leadership focused on it," said Rep. Marion Berry, D-Ark., a former pharmacist who sponsored the bill.

Independent pharmacists complain that while insurers and drug companies profit from Medicare's drug benefit, the program is causing them financial pain because the insurers don't pay them quickly enough.

As a result, the National Community Pharmacists Association says, independent pharmacies have been forced to take out loans averaging $70,000 to pay drug suppliers while waiting for payments from insurers. The association says 1,152 community drugstores closed last year, some because of problems related to the new drug benefit.

The Pharmaceutical Care Management Association, which represents insurers, says all "clean" claims are paid within 30 days. But a new study by the University of Texas found that independent pharmacists were reimbursed within 30 days on just half of their 2006 claims.

Berry's bill would require insurers to pay pharmacists as quickly as 14 days.