By Adjoa Adofo, CQ Staff

DECEMBER 15, 2008 -- With Sen. Hillary Rodham Clinton likely headed to Foggy Bottom in January, Sen. Jeff Bingaman has been tapped to replace her as head of a health care insurance reform working group.

Sen. Edward M. Kennedy, chairman of the Senate Committee on Health, Education, Labor and Pensions, made the announcement in a statement released earlier today. Bingaman, D-N.M., will head up the insurance element of the three health care groups within the committee designed to tackle the complicated and touchy issue of health care reform.

Sen. Barbara A. Mikulski, D-Md., is heading the group dealing with quality issues, while Sen. Tom Harkin, D-Iowa., is chairing the group addressing prevention and public health.

Kennedy, D-Mass., also tapped Sen. Christopher J. Dodd, D-Conn., to serve as his chief deputy to help coordinate the effort.

Harkin's group has already held one hearing this month.

Bingaman, who served during the 110th Congress as chairman of the Health panel's subcommittee on children and families, has worked on legislation addressing the problem of obesity and has promoted more physical activity in schools.

By Drew Armstrong, CQ Staff

DECEMBER 18, 2008 -- Health care overhaul will be a priority for President-elect Barack Obama, but a new set of cost estimates by the Congressional Budget Office (CBO) lays out more than a few fiscal challenges for lawmakers hoping to write legislation.

According to two CBO reports released Thursday, "serious concerns exist about the efficiency of the health care system, but no simple solutions are available to reduce the level or control the growth of health care costs."

In 2009, health care spending nationwide will make up 17 percent of the gross domestic product, or $2.6 trillion. But by 2017, health spending will make up 20 percent of GDP, and spending per person will rise from $8,300 to $13,000. Meanwhile, federal spending on Medicare and Medicaid will nearly double by 2019, to $1.4 trillion. Most of the increase, according to the CBO, is not from changing demographics but rather from the rising per capita cost of medical care.

The first report, "Key Issues in Analyzing Major Health Insurance Proposals," pokes a hole in the hopes of advocates of health information technology and preventive care—tactics long looked to as major cost savers.

According to the report, those two tactics—could improve people's health but would probably generate either modest reductions in the overall costs of health care or increases in such spending within a 10-year budgetary time frame." For example, requiring doctors and hospitals to adopt health information technology like electronic medical records and prescribing would save taxpayers $22.8 billion over 10 years—a sizeable sum, but not enough to significantly bend the growth in costs.

As for preventive care, widespread programs would end up reducing costs for the small segment of people who would otherwise turn into costly, chronic patients. But at the same time, an even larger portion of people would get preventive care treatments that would, ultimately, cost much and mean little because they were unlikely to develop serious, preventable conditions anyway.

Lawmakers often refer to the CBO reports in crafting legislation. Obama has promised to take up health care overhaul as one of his first priorities, and lawmakers in both chambers are already working up their own plans.

The second CBO publication, a list of policy options published annually, explains the budget implications of various health care proposals, including what would happen through changes to insurance laws.

In his blog, acting CBO Director Robert Sunshine said Thursday that universal coverage likely could be achieved through a combination of mandates, like "pay or play," and subsidies to help the uninsured buy coverage.

If, for example, there was a "pay or play" requirement to force employers to offer insurance or pay a $500-per-employee fine, 330,000 uninsured people would gain coverage, and 90,000 people would come off Medicaid. Government revenues would increase $48.3 billion over 10 years, mostly through collection of fines.

Other options laid out in the CBO reports would have far larger fiscal effects. Senate Finance Committee Chairman Max Baucus, D-Mont., has mentioned changing the tax code as a way to help control health insurance costs. And during the 2008 presidential campaign, Sen. John McCain, R-Ariz., proposed capping the tax exclusion for health benefits. By capping the allowed deduction of health care costs at $565 per month for an individual and $1,440 for a family, the government would save $452 billion over 10 years.

Other researchers also have been studying how to reduce health care costs. A report released Wednesday by the Dartmouth Atlas project said that by reducing wide variations in cost and quality of care that exist across the country, universal coverage could pay for itself.

"We predict that covering everyone will have a much smaller impact on the trend in health care costs, provided that capacity is not increased," said the study's authors, John E. Wennberg and Shannon Brownlee.

According to Wennberg and Brownlee, the government could greatly reduce costs by using payment schemes that force health care providers to coordinate care more and organize into delivery systems, instead of individual providers. The Dartmouth paper also recommends redrawing insurance boundaries, so that high-cost areas and low-cost areas can be separated, creating a more efficient market.

That could also mean changes in the way the government pays for services, mostly through Medicare and Medicaid. "The current health care system does not give doctors, hospitals, and other providers of health care incentives to control costs. Significantly reducing the level or slowing the growth of health care spending would require substantial changes in those incentives," said the report.

CBO gives several examples of how to do so. So-called "bundling" of payments—one lump sum for treating of a condition—for hospital care and follow-up would save $18.6 billion over 10 years. Currently, doctors, hospitals and other providers receive many separate payments to treat such a patient. One result of bundling would be more coordination of care. With a single payment, hospitals, doctors and other providers would have an incentive to work more closely together and increase efficiency.

The CBO budget options report also deals with changes to entitlement programs, both as a way to save money and decrease the number of uninsured. Few politicians have dared propose raising the age of eligibility for Medicare to 67, but doing so would save the program $85.6 billion over 10 years.

Another proposal would let people aged 62 to 64 buy into Medicare. While letting them buy in would cut 80,000 from the roles of the uninsured, it would cost $1.2 billion over 10 years.

Medicaid changes are another possibility. Letting people buy into the program up to 300 percent of poverty would cover 1.1 million uninsured and would cost $7.8 billion over 10 years.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

DECEMBER 18, 2008 -- Health care coverage and quality could be improved by reducing the oversupply of health care services in high spending regions of the country, promoting organized systems of care and giving patients more information about the full range of treatment options available, according to a new Dartmouth Atlas white paper.

In addition, the Dartmouth researchers recommend that the Medicare program should promote the training of more primary care physicians and provide greater funding to programs that teach coordinated, community-based care for chronic illness. Medical effectiveness research must create a system for continuous evaluation of new clinical theories and technologies, and greater focus should be placed on organized systems of care that provide better medical treatment at less cost.

"Most analyses of coverage reform predict that we will spend more as a nation on health care once the uninsured gain coverage and begin consuming more care," the paper's lead authors, John E. Wennberg and Shannon Brownlee, said in a news release. "But we predict that covering everyone will have a much smaller impact on the trend in health care costs, provided that capacity is not increased." Other co-authors of the paper, released by the Dartmouth Institute for Health Policy and Clinical Practice, are Elliott S. Fisher, Jonathan S. Skinner and James N. Weinstein.

Separately Thursday, the Congressional Budget Office (CBO) released a set of cost estimates that detail the fiscal challenges that await lawmakers and incoming president Barack Obama as they contemplate major changes to the nation's health care system. Democrats and Obama have linked overhauling health care to a broader economic revival.

CBO Director Peter R. Orszag--who has been nominated to head the Office of Management and Budget in the incoming Obama administration--has previously pointed to Dartmouth studies showing that lower cost areas in the United States, such as the upper Midwest and Northwest, have quality of care at least as good as that of more expensive "interventionist" parts of the country in which far more health care resources are used. Orszag has testified on Capitol Hill that Wennberg's work offers the nation a way out of the fiscal crisis it faces because of unsustainable health care spending increases, in that it suggests spending growth can be cut without sacrificing quality.

By Emily Ethridge, CQ Staff

December 15, 2008 -- Medicare Advantage private fee-for-service (PFFS) plans can cost beneficiaries more than other Medicare plans through higher cost-sharing fees and illegal "prenotification" obstacles, according to a report from the Government Accountability Office.

Medicare pays more for beneficiaries in PFFS than if they were in original Medicare fee-for-service plans--about 17 percent more in 2008, according to the Medicare Payment Advisory Commission. About 2.3 million beneficiaries were enrolled in PFFS plans as of June 2008, GAO said.

The higher costs to beneficiaries in PFFS plans affect the Medicare Advantage program as a whole. The federal government is projected to spend about $91 billion on the program in 2008, according to the December report.

Under PFFS plans, beneficiaries can be charged the entire service cost, whereas those in original FFS Medicare plans do not pay the entire cost unless the provider warns that Medicare may not cover it. PFFS plans are not required to protect beneficiaries from financial liability, unlike with Medicare HMOs and PPOs, the report said.

In addition, if beneficiaries do not notify the plan before receiving care, PFFS plans can charge them exorbitant cost-sharing, the report said. This prenotification cost could violate laws governing PFFS plans. For example, PFFS plans increased cost-sharing for hospital visits by as much as $500 per stay if patients did not contact the plan ahead of time, the GAO found.

In the report, Centers for Medicare and Medicaid Services (CMS) said it is examining PFFS coverage details and will continue to collect information from plans. It also will take steps to address inaccuracies in plans--following CMS guidance, the agency said.

"PFFS plans pose an imminent risk to the financial health of their enrollees," said House Energy and Commerce Chairman John D. Dingell, D-Mich. He had requested the GAO report along with four other Democratic lawmakers: Charles B. Rangel of New York, Henry A. Waxman and Pete Stark, both of California, and Frank Pallone Jr. of New Jersey.

The report recommended that CMS should investigate the PFFS' unexpected costs for failure to notify before receiving care, and ensure the plans are following CMS policy.

CMS officials told GAO they did not have data on the extent to which PFFS beneficiaries were faced with such costs. However, CMS guidance on this issue has been inconsistent and sometimes incorrect, GAO said.

PFFS plans seem to be more unpopular with enrollees than other Medicare plan options, according to the report. The GAO found 21 percent of beneficiaries in PFFS plans leave the plans during a year, far more than the 9 percent disenrollment rate for other private Medicare plans. Beneficiaries who left PFFS plans were sicker compared with all beneficiaries in PFFS plans, the report found, suggesting that the plans are not helpful for sick enrollees who need to use their benefits.

CMS said in the report that it recently awarded a contract to gather disenrollment rates by late 2009.

CMS is required to share disenrollment rates with beneficiaries. However, the agency has not been mailing the disenrollment information, and the information on Medicare's Web site comes from 2004 and 2005 disenrollment rates, the report said, which may not accurately reflect plans available in 2008.

The report recommended that CMS provide beneficiaries with updated, timely disenrollment rate information both through both the mail and on the Medicare Web site.

Although CMS has outlined the steps it is taking to respond to the report's other recommendations, it has not addressed how it would distribute disenrollment rate information, the report said.

PFFS plans remain an important coverage option for many seniors, especially those in rural areas, said Robert Zirkelbach, strategic communications director for America's Health Insurance Plans. They offer additional services and benefits such as hearing and vision coverage that other Medicare plans may not, he said.

"Seniors have been very attracted to these plans," he said, and have "continually expressed very high satisfaction in the plans."

But some members of Congress do not agree that the plans should continue. Pallone called for the incoming Obama administration to eliminate them.

By Emily Ethridge, CQ Staff

DECEMBER 19, 2008 -- Retail clinics are convenient and keep costs low for many patients, but the vast majority of Americans have never visited one, several reports have found. Although patients report high satisfaction with the clinics, it remains to be seen whether the retail clinics' clientele will expand.

The clinics are found in pharmacies and big-box retailers such as CVS, Walgreens, Target and Walmart. Although the number of clinics is growing rapidly, only a small percentage of American families have ever visited them. The number of retail clinics grew to more than 900 in 30 states by the end of 2007, up from about 60 in early 2006, said a study by the Center for Studying Health System Change (HSC). Yet only 2.3 percent of American families, or about 3.4 million families, had ever used a retail clinic as of 2007.

Minnesota stands out with high rates of clinic use—6.4 percent of the state population have visited a clinic—and Florida has more retail clinics in operation than any other state. The clinics have a more long-standing presence in Minnesota and Florida than in other states.

The clinics provide a valuable source of care for many Americans, especially those without a primary care physician, the HSC survey found. For example, families that reported not receiving or delaying needed medical care within the last year were almost 2.5 times as likely to have used a retail clinic, compared with families who did not report having access problems.

"While overall use of retail clinic remains modest, families with unmet medical needs tend to use the clinics more than the rest of the population," said HSC Senior Researcher Ha T. Tu.

Cost concerns and lacking a primary care physician were major factors for uninsured and minority clinic users in choosing to go to a clinic, the HSC report found. In addition, families where at least one member lacked health insurance accounted for 27 percent of clinic users.

Another report, published in Health Affairs, found that retail clinics serve a patient population that is underserved by primary care options. Three out of five retail clinic patients reported they did not have a primary care physician, and one-third said they did not have insurance, said the report, "Retail Clinics, Primary Care Physicians, And Emergency Departments: A Comparison of Patients' Visits."

"It is possible that retail clinics could serve as a safety-net provider for some patients who now seek care in emergency departments," the Health Affairs report said. Overall, it found that retail clinic patients are more likely to be young adults who pay out of pocket for care and are less likely to have a primary care physician.

In addition, almost all retail clinic visits—more than 90 percent—are for simple conditions, such as upper respiratory infections, and preventive care such as immunizations, the report found.

Consumers choose retail clinics for other reasons as well, such as convenience and low cost, the HSC study found. Nearly two out of three people said they chose the clinic because of its convenient hours, and nearly half said the clinics' low cost contributed to their choice.

"The retail clinics have the potential to improve health care delivery, especially primary care," said Commonwealth Fund Vice President Anne-Marie Audet. The Commonwealth Fund released the HSC report.

Consumers also are satisfied with the care they receive at retail clinics. Another article in Health Affairs, "A Checkup for Retail Medicine," said that independent surveys show about 90 percent satisfaction with retail clinics in the areas of quality care, convenience and cost.

By Derek Wallbank, CQ Staff

DECEMBER 16, 2008 -- State officials in California, looking to patch a gaping hole in the state's budget, will try in 2009 to cut costs by scratching ineligible recipients from its Medicaid rolls. But those efforts may actually wind up costing the state more, according to a new study.

That's because those whose coverage has been interrupted are more likely to be hospitalized for a treatable condition, like diabetes, high blood pressure and asthma, than those with continuous coverage, the Annals of Internal Medicine study found in its study released Dec. 15.

Funded by the Commonwealth Fund, the study looked at California Medicaid recipients from 1998 to 2002, when adults were required to re-prove their eligibility every three months. That policy was changed in 2001 to every six months, state officials said.

"People are making the decisions based on short-term controls rather than looking at the long-term effects," said Andrew B. Bindman, a professor at the University of California, San Francisco, who authored the study. "But it's not just the money--remember we're making people get hospitalized who wouldn't otherwise get hospitalized."

According to the study, those with interrupted health care coverage had an almost 30 percent chance of being hospitalized for a preventable condition within five years, vs. about 3 percent for Medicaid recipients with uninterrupted coverage.

The study comes just weeks before just such a decision goes into effect on Jan. 1. That's when California will begin to require children in the Medi-Cal program, its version of Medicaid, to have their eligibility verified every six months, rather than annually as they are now.

"The primary reason behind this reform is the budget in California," said Tony Cava, spokesman for the state Department of Healthcare Services. "Because of our current shortfall we can't continue to cover those ineligible."

Cava estimated about 34,000 of the state's 3.3 million children on Medicaid will leave the program in 2009, a decline of about 1 percent. The hope is that savings from that drop--projected at $193 million--will help offset the state's looming budget deficit, which state leaders project could reach $41.8 billion over the next 18 months.

The pressures to reduce Medicaid costs aren't confined to the Golden State. Medicaid spending ranks second behind K-12 education in state spending, consuming about 20.7 percent of state budgets, according to the National Association of State Budget Officials. States spent approximately $142.6 billion on Medicaid in 2007, about 43 percent of the program's $333.2 billion total cost.

And Medicaid spending is projected to double by to $673.7 billion by 2017, according to an October report from the Centers for Medicare and Medicaid Services.

With the stagnating economy, the Medicaid population is likely to surge. An average of 49.1 million were on Medicaid in 2007; that number is expected to top 50 million this year and is forecast to grow to more than 55 million by 2017.

"It's at the same time that revenues are falling and there's a real push for cutbacks," said Robin Rudowitz, principal policy analyst for the Kaiser Commission on Medicaid and the Uninsured. "It winds up being a real crunch for states."

By Alex Wayne, CQ Staff

DECEMBER 17, 2008 -- Rep. Pete Stark, D-Calif., who chairs a subcommittee that will be influential in efforts to overhaul the health care system, said Wednesday that any plan must include a new government-run health insurance option, modeled on Medicare, that would compete with private insurers.

He also said that he does not expect Congress to pass a health care overhaul until late in 2009 or perhaps 2010. That was a pointed contrast with some Senate Democrats--notably Finance Chairman Max Baucus, D-Mont.--pressing to pass a health overhaul within the first few months of the Obama administration.

Stark, chairman of the Ways and Means Health Subcommittee, is one of the most liberal members of the House. He has long supported expansion of Medicare to cover every American, so it comes as little surprise that he would endorse a twist on that approach as part of a health care overhaul. His call is almost sure to draw strong opposition from private insurance companies.

But Stark evinced no concern about that threat Wednesday.

"We're not going to have the insurance companies on board, but they're the easiest ones to roll because nobody likes insurance companies," he said in a conference call with reporters. Stark is a longtime critic of the insurance industry.

America's Health Insurance Plans, the industry's trade association, recently announced that if Congress passes a law next year requiring every American to purchase health insurance, its members would agree to sell policies to everyone and would stop excluding from coverage people who are in poor health or who have histories of medical problems.

"Health care reform should build on what's working in the current health care system and allow patients to continue to benefit from health plans' innovative care coordination and disease-management programs," said Robert Zirkelbach, a spokesman for AHIP. "We are committed to health-care reform and look forward to working with policymakers to achieve the shared goal of universal, affordable coverage."

President-elect Barack Obama has made a systemic health care overhaul a top priority; he wants to expand insurance coverage to all or nearly all Americans while reducing the spiraling costs of care. Former Sen. Tom Daschle, D-S.D., Obama's nominee to lead both the Department of Health and Human Services and the health care overhaul effort, has proposed a plan that would include opening the Federal Employees Health Benefits program to all Americans.

Crowding Out Private Insurers?

But that differs from what Stark endorsed on Wednesday. The FEHB provides a range of private insurance coverage options to government employees, including members of Congress. It does not include a government-run insurance plan.

Stark's conference call was organized by the Campaign for America's Future, a liberal interest group. Stark was joined on the call by Jacob Thacker, a University of California professor who released a report Wednesday laying out what he says are the benefits of a public insurance option in a health care overhaul.

"The core argument is that public insurance has distinct strengths and thus, offered as a choice on a level playing field with private plans, can serve as an important benchmark for private insurance within a reformed health care framework," Hacker wrote. Medicare, he said, has proven better than private insurance plans at controlling health care costs and "has pioneered new payment and quality-improvement methods that have frequently set the standard for private plans."

Hacker and Stark said they don't intend for a public insurance plan to replace private insurance entirely, but Stark conceded that might be the result if such a plan were enacted.

"I don't know that it would destroy private insurance," he said. "I do suspect that if we eliminated selection and had to have universal coverage at community rating, as I suspect any plan would have, that the larger plans would basically become intermediaries," or contractors within the public insurance plan.

Stark's timetable for a health overhaul might put him at odds with his colleagues in the Senate. Both Baucus and Sen. Edward M. Kennedy, D-Mass., the chairman of the Senate Finance and Health, Education, Labor and Pensions Committee, plan to introduce comprehensive health reform bills early next year and want to move on them quickly, perhaps within the first 100 days of Obama's presidency.

But Stark said he does not believe an overhaul can pass that rapidly. He said Congress has "deferred maintenance" to address first, including an expansion of the Children's Health Insurance Program (SCHIP) that was vetoed by President Bush in 2007. And he said lawmakers should wait until Obama is inaugurated and can officially engage in the health care debate as president.

"I think it's imperative that we wait for the new administration," he said. He said he thinks it will take about a year for each chamber to coalesce around its own health reform plan.

"I like the idea of voting on them no later than the very early part of 2010," he said. "I would think it'll take a full year."