By John Reichard, CQ HealthBeat Editor

April 23, 2013 -- Advocates for the poor are alarmed that if states do not expand their Medicaid programs under the health care law, millions of uninsured Americans will continue to go without coverage next year.

There's no doubt that's true. But the size of the group that will go without isn't as big as one might think. Why? Because of a provision of the health care law that received almost no attention before the Supreme Court ruled last year that states have the right to opt out of the Medicaid expansion.

At issue is a category of uninsured adults with annual incomes between 100 percent and 138 percent of the federal poverty line. The health care law says this group qualifies for federal subsidies to buy coverage on the insurance exchanges, which are set to begin enrolling people on Oct. 1.

That was a surprise to many analysts who had been closely following the health care law and its provisions to expand coverage for the poor under Medicaid, and for those with higher incomes, through federal subsidies in the form of refundable tax credits. Such assistance is designed to help consumers afford the premiums for coverage in the new marketplaces.

As originally written, the law (PL 111-148, PL 111-152) specified that those without access to affordable coverage who had incomes below 138 percent of the federal poverty line would be covered through the Medicaid expansion, which was expected to happen in every state. Between 138 percent and 400 percent of the poverty line, people without affordable coverage would go to exchanges where they could sign up for a health plan whose premium charges would be offset by the subsidies, which would be based on a sliding income scale.

Few predicted the scenario that actually came to pass: that the high court would strike down the requirement that states expand their Medicaid programs but keep subsidies in place for those between 138 percent and 400 percent of poverty.

So, until the justices ruled, scant attention was paid to the fact that the law also provided that uninsured adults with incomes between 100 percent and 138 percent of the poverty line would be able to go to exchanges if their states did not expand Medicaid. Now, with up to half of the states possibly not expanding their programs next year, the importance of the subsidies available to that group is magnified.

One question that has surfaced is how the 100 percent to 138 percent group ever came to be. If people assumed that states would be required under the health care law to expand Medicaid, why did the law include federal subsidies for the 100 percent to 138 percent group in states that did not expand their Medicaid programs?

The answer, analysts say, appears not to be a hedge in case the Supreme Court did the unexpected and made Medicaid expansion optional. Rather, it appears that drafters originally planned that those eligible for exchange subsidies would have to have incomes between 100 percent and 400 percent of the federal poverty line.

Those devising the law only switched the income cutoff to between 138 percent and 400 percent because they needed to get a lower overall score of the cost of the health care law from the Congressional Budget Office and creating a larger Medicaid expansion group brought down the cost.

Questions Persist

Many basic questions about that group have remained unanswered until recently. For example, how many people does it include? What percentage is this group of the overall Medicaid expansion population? How will the coverage in the exchanges for people in the 100 percent to 138 percent category compare with what they would have been entitled to had their state expanded Medicaid? What percentage of those in that income group that will be eligible for subsidized coverage on the exchanges actually sign up? And will those enrolling in private plans through the new marketplaces have better or worse access to doctors and hospitals than they would have under a Medicaid expansion?

Definitive numbers aren't yet available to answer these questions. But based on interviews with knowledgeable analysts, the availability of subsidies for the income group between 100 percent and 138 percent of poverty eases the hit of a decision by a state not to expand Medicaid. However, people in this category will have to pay higher out-of-pocket charges for coverage than if their state expands its Medicaid program. Already struggling to pay their bills, at least a sizable minority of them may not sign up for coverage through the exchanges. And many millions of the neediest, and arguably most deserving, uninsured will continue to go without coverage under the overhaul—even as their higher-income counterparts qualify for federal help to get insurance.

Jennifer Tolbert, director of state health reform at the Kaiser Family Foundation, estimates that there are 5.3 million uninsured adults nationwide with annual incomes between 100 percent and 138 percent of poverty. She also says there are about 20.1 million uninsured adults with incomes below 138 percent of poverty, so about a quarter of the potential Medicaid expansion population under the health care law could still get subsidized exchange coverage, even if none of the states expanded their Medicaid programs. Of course, some will and some won't, but those national figures give at least a rough idea of the importance of the 100 percent to 138 percent category in any state.

States have nothing to do with whether someone gets a subsidy; that's between the individual and the federal government. But while the subsidies are considered generous, they do not cover all premium costs. Tolbert says people in the 100 percent to 138 percent group will have to pay premiums of up to 2 percent of their annual incomes. So an individual with an annual income right at the poverty line, or 100 percent of poverty, would be on the hook for $229 per year in premiums, or about $19 per month, Tolbert says.

Extra Subsidies Available

Also, if they get private coverage on the exchange, these consumers would have to pay out of pocket for things like deductibles and copayments. On the other hand, the 100 percent to 138 percent group would get subsidies to cover those out-of-pocket charges in addition to the refundable tax credits they get to help pay premiums. How much of a subsidy for out-of-pocket charges other than premiums? Tolbert says the subsidy would be such that their coverage had an actuarial value of 93 percent. That means that, on average, they would be on the hook for 7 percent of the costs of services covered by their plan, which would pick up the other 93 percent.

If the state expanded its Medicaid program, however, those in the 100 percent to 138 percent of poverty would not have to pay any premiums. Also under the Medicaid expansion, it's up to each state to decide whether to require people in this group to pay anything out of pocket when they go to a doctor or hospital.

So under the health care law, coverage for the 100 percent to 138 percent group does come with some strings attached—namely some potential out-of-pocket charges.

Ron Pollack, executive director of Families USA, says that while those charges might seem minimal, they may be beyond the reach of people at or around the poverty line who simply don't have enough money to pay the existing bills they already face. So Pollack questions how many people who can get coverage on exchanges in the 100 percent to 138 percent group actually will do so.

That means even though up to 25 percent of the Medicaid expansion population will qualify for insurance funded by the health care law even if their states choose not to expand Medicaid, the proportion who actually get it could be far lower than one in four.

However, Matt Salo, executive director of the National Association of Medicaid Directors, has a different take. He says people at the poverty line and somewhat above have access to other forms of federal assistance in many instances. Their incomes might be low, but so too are the out-of-pocket charges they would have to pay, he says.

"These people don't have zero money. They are working, they have income. I think it's a stretch to say they would walk away from it," Salo says. As a matter of "total speculation," Salo says up to three-quarters of those who would qualify for subsidies to buy private coverage on exchanges would potentially do so.

Tolbert declines to make any predictions on that score. On the one hand, she notes the difficulty of paying $19 per month when people have low incomes and face other bills. On the other hand, she notes that people in the 100 percent to 138 percent group may be particularly motivated to pay the $19 per month and the other out-of-pocket charges they face if they'll have to pay health care law penalties for being uninsured. The Department of Health and Human Services is in the rule-making process on the question of whether penalties will be charged to that income group.

Will Care Be Available?

Coverage is one thing, but access to actual care is another. Access to providers in Medicaid can be more of a problem than if one has private coverage.

Salo says access to providers will be the same in private coverage regardless of one's income. That could be a plus, then, if one has coverage obtained through the exchange and access to doctors in the traditional Medicaid program in one's state is problematic.

"They'll all be in the same plan," he says of those who get private coverage on the exchange. "People at 100 percent of poverty with maximum subsidies and people at 400 percent of poverty with minimal subsidies, and potentially people at 800 percent of poverty with no subsidies, will all be in the same plan, will all have the same card and will all have the same ease or difficulty in actually seeing doctors," Salo says.

Tolbert says not everyone agrees that that's the case, however. There's a requirement that plans offered in exchanges include essential community providers, she acknowledges. "But I think there is still some concern" that the providers in a plan may not be located near low-income enrollees who don't have the same access to transportation that those with higher incomes do.

By Jane Norman, CQ HealthBeat Associate Editor

April 25, 2013 -- Both Republicans and Democrats at a House hearing last week expressed interest in ways to seek more transparency in the pricing of health care, with the idea that health care costs could be reduced if patients had more information about the cost and quality of their medical services.

There were some partisan jabs during the Oversight and Government Reform subcommittee hearing, and widely varying opinions of what the health care law (PL 111-148, PL 111-152) might or might not do to reduce costs—both for the system and for individuals. But there also appeared to be a bipartisan desire to find a way to repair a U.S. health care system that the Institute of Medicine in a 2012 report said wastes 30 cents of every health care dollar.

Republican James Lankford of Oklahoma, chairman of the Subcommittee on Energy policy, Health care and Entitlements, criticized a "massive bureaucracy focused on claims processing" that creates frustration among both providers and patients. And he distributed a letter sent to him by G. Keith Smith of the Surgery Center of Oklahoma, a physician-owned facility that displays its surgical prices online and wants to start a "price war" that will lower the cost of care.

Jackie Speier of California, top Democrat on the panel, cautioned that she doesn't believe in forcing patients to have more "skin in the game" as a cost-cutting approach because too many people already report going in to bankruptcy due to medical bills. But she also said it's a problem that consumers can't shop around for a deal, and that medicine is different than any other market in that way.

Something is "fundamentally wrong" when U.S. consumers pay so much for health care and get back so little value, she said.

Limited Access to Data

Martin A. Makary, a surgeon at Johns Hopkins Hospital in Baltimore who's written a book titled "Unaccountable" that advocates for more transparency, told the panel that one major problem is the lack of public access to publicly funded data bases that could provide more information on patient outcomes.

For example, a national pancreas transplant registry funded by the National Institutes of Health tracks patient outcomes through voluntary reports, he said. But the data is not disclosed to the public, Makary said.

A research team he worked with was able to finally access data to try and determine whether minimally invasive laparoscopic surgery was being frequently used in situations where it is established that it leads to lower infections, less pain and better functional outcomes compared to open surgery, Makary said. They found that the use of less invasive procedure varies widely for common procedures like appendectomies, with differences depending on region and the training of providers.

But he said more disclosure of the information in the registries is needed so similar comparisons could be made.

"There are over 150 national clinical registries which track patient outcomes. One quarter are taxpayer funded, yet only three make their outcomes available to the public," he said. "Making public access a condition of taxpayer funding is one simple reform which would allow the free market to work to cut waste in health care."

John Goodman, president and CEO of the right-leaning National Center for Policy Analysis, praised "doc in the box" clinics that post prices for routine and preventive care. "In health care few people ever see a real price for anything," he said.

Another witness, Lynn Quincy, a senior policy analyst with Consumers Union, said that "improved transparency is an issue we can all get behind." But she cautioned that too much transparency can lead to confusion, using as an example the long and wordy privacy notices required to be issued by doctors and other health care providers.

For health care, the best information would include the final price paid by the consumers; allow consumers to compare by price alternative treatments, drugs or providers; and provide some kind of indication of the value of the treatment, she said.

Democrat Elijah E. Cummings of Maryland agreed that too much data is overwhelming. "We have people in Congress who don't know how to read data, with law degrees," he said. "I want to be practical."

By Melissa Attias, CQ Roll Call

April 25, 2013 -- Health and Human Services Secretary Kathleen Sebelius recently reiterated that states can enter and exit the Medicaid expansion included in the health care law without losing their other Medicaid funds, responding to concerns from an Arkansas lawmaker.

Republican Rep. Steve Womack noted that his home state signed "something rather innovative" into law this week that would allow Arkansas to expand Medicaid by providing coverage through an insurance exchange set up under the health care overhaul.

Although the Obama administration still has to sign off on the plan, it is being closely watched by other states with concerns about expanding the Medicaid program. Sebelius said her department is eager to receive a specific proposal for the Arkansas waiver now that the legislation has passed.

But Womack expressed concern at a House Labor-HHS-Education Appropriations Subcommittee hearing about what would happen if his state later has to employ the "circuit breaker," as he referred to it, and stop the program.

"Provided you approve the proposal, our state is depending on you to be ... a stable funding partner," he said. "I also recognize that the Arkansas legislation that was signed has an off ramp, a circuit breaker in the event that promises made today perhaps aren't kept."

Sebelius said that the Supreme Court ruling essentially divided Medicaid into the traditional program and the expansion under the health care law (PL 111-148, PL 111-152), which provides an enhanced federal match if states extend their programs to individuals under age 65 with annual incomes up to 138 percent of the poverty line. The federal government would cover 100 percent of the costs of those newly eligible from 2014 to 2016, with its share gradually decreasing to 90 percent in 2020 and thereafter.

Sebelius noted that her department has said in guidance to states that they can come in and leave the new program when they want, and said that Arkansas basically codified that concept in its legislation.

"The guidance from HHS has been pretty clear from the outset," Sebelius said. "If this is a financial detriment, you come out of the new program if you will and there is no impact on the traditional Medicaid."

Still, she acknowledged that concern exists that the federal government will not live up to its end of the funding requirement.

"There is a lot of fear voiced with governors, not just [Arkansas] Governor [Mike] Beebe but I talk to governors virtually every day and they say, well, what if Congress changes the deal? What if, you know, we look at this funding and it switches next year or the following year?" she said. "Which is why I think it was important that the president and Gene Sperling, his head of the Council of Economic Advisers, made very clear that this president, at least, is committed to the funding formula."

Womack also asked whether Sebelius is concerned that the "circuit breaker" may be triggered in a few years. "I'm hopeful that that won't be the case," she said. "I think that, again, there is some incredibly impressive work going on with governors and with the flexibility that we have given governors around the Medicaid program."

By Jane Norman and John Reichard, CQ HealthBeat Associate Editor

April 26, 2013 -- Hospitals would get a fairly skimpy net rate increase of 0.8 percent in fiscal 2014, under a rule that the Centers for Medicare and Medicaid Services (CMS) posted late last week.

In addition, that large of an increase would go only to hospitals that successfully participate in a quality reporting program developed by CMS, according to documents released by the agency. Those hospitals that are not successful would get slapped with a penalty equal to a 2-percentage-point reduction in that proposed payment increase.

In addition, the proposal reveals how CMS plans to administer a new patient safety program that's part of the health care law (PL 111-148, PL 111-152) and will be launched in fiscal 2015.

These quality-focused provisions and others continue the Obama administration's stress on trying to more closely link hospital payments to how well institutions perform, rather than simply the number of patients they treat.

"The new policies in this proposed rule support hospitals' important work and the people with Medicare who depend on them by promoting safety and care improvement," said Marilyn Tavenner, acting CMS administrator, in a statement.

Compared with fiscal 2013, total inpatient hospital payments for both operating and capital payments in fiscal 2014 are projected to increase by $27 million.

The proposal would apply to about 3,400 acute-care hospitals as well as 440 long-term-care hospitals and would be effective for discharges on or after Oct. 1. Long-term-care hospitals would receive a payment increase of 1.1 percent under the proposal, or about $62 million in all.

The proposed 1,424-page rule will be published in the Federal Register on May 10.

CMS sets rates in advance for hospitals based on patients' diagnoses and the severity of their illnesses.

Overall, the increase would be 0.8 percent. That is computed by starting with a 2.5 percent increase to account for increases in the costs of goods and services used by hospitals. But that's then decreased after CMS takes into account various adjustments, including reductions required under the health care law and for earlier overpayments due to documentation and coding changes. Those overpayments of $11 billion are to be recovered during the next three years as well.

Among the notable features of the proposal are the shifts of money that occur among states stemming from what are known as the "rural floor" and the "imputed floor" provisions. For example, Massachusetts hospitals together would get $169 million more from Medicare even though only one facility in the state is designated as rural. Many other states are in for reductions stemming from the floor provisions, in part because of the shift to Massachusetts. Massachusetts is by far the biggest beneficiary of the floor provisions, with critics calling the shift of money to the state's hospitals "the Massachusetts manipulation."

Health law provisions leave a big imprint on the proposal. For example, more money is being tied to how well hospitals perform on quality measures. This is part of what's called the Value Based Purchasing program.

The proposal increases to $1.1 billion the pool of money from which payments are taken to pay facilities that perform well on quality scores. The proposal creates that pool by reducing Medicare inpatient hospital payments to all facilities initially by 1.25 percent. Facilities that perform well get all that back and more and would end up with a net increase of 0.8 percentage points.

Another big change relates to provisions of the overhaul that lower payments if patients in a hospital acquire an infection or the facility performs poorly on other patient safety measures. Infections and unsafe forms of care fall under the rubric of "hospital-acquired conditions."

The proposal outlines a framework for starting these payment changes in fiscal 2015. "Under this program, hospitals that rank in the lowest-performing quartile of hospital acquired conditions would be paid 99 percent of what they would otherwise would be paid" in fiscal 2015, the proposed rule says.

Two sets of measurements would be applied. One consists of six patient safety measures. These include the incidence of pressure ulcers, or bed sores; the "volume of foreign objects left in the body; "the rate of "accidental puncture and laceration"; and post-operative pulmonary embolism, among others.

The second set of measures relates to infections. They include catheter associated urinary tract infections and blood stream infections associated with the "central line" used to stream medications into the patient through insertion in the neck or chest.

The proposal also increases penalties in fiscal 2014 for certain preventable hospital readmissions. The maximum reduction under this program was 1 percent of payments in fiscal 2013. In fiscal 2014, the proposal increases that to 2 percent. The readmission penalties currently relate to heart attack, heart failure, and pneumonia. CMS is proposing to add two new readmission measures in fiscal 2014 that would be used to dock payments in fiscal 2015. They are readmissions for chronic obstructive pulmonary disease and for hip/knee arthroplasty.

By John Reichard, CQ HealthBeat Editor

April 25, 2013 -- The Obama administration recently dealt on multiple fronts with the hot-button issue of rate hikes under the health law, a foreshadowing no doubt of other such days to come this summer and fall as full implementation of the overhaul approaches.

Republicans wasted no time in calling attention to a proposed 25 percent rate hike by Maryland insurer CareFirst Blue Cross/Blue Shield in individual policies to be sold this fall on the state's health insurance exchange. The insurer, which sells 70 percent of the policies sold in Maryland's individual market, blamed the hike largely on the fact that the health law will require insurers to take all comers.

Rep. Andy Harris, a Republican lawmaker from Maryland, confronted Health and Human Services Secretary Kathleen Sebelius with the proposed hike at an appropriations subcommittee hearing last week. Harris juxtaposed the announcement with claims by the administration that the health law means affordable coverage for all.

The 25 percent average hike encompasses a range of a slight decrease for some customers to 150 percent increase for the youngest and healthiest who apply for insurance, Harris noted. "Certainly that person who is getting that 150 percent increase is not going to feel that they are getting quality insurance at an affordable price," Harris admonished Sebelius.

"How am I going to tell them that the Affordable Care Act was actually good for that 25-year-old healthy person?" he asked.

"Well, the company has submitted a filing," Sebelius responded. "And there is a rigorous review process now, so this is the starting place." She added that as a former insurance commissioner she doesn't think the final CareFirst rate hike will be that high.

"The second piece of news I think is that it appears that Maryland will have more competition thanks to the Affordable Care Act than they do right now,'' Sebelius said. Two new companies are coming into the market, and "several other companies have filed rates at the same time that CareFirst filed rates that are significantly lower and don't have the kind of whopping increase that CareFirst has asked for."

Reportedly, Kaiser Permanente will sell nine health plans in Maryland next year and is proposing a rate hike of 4.3 percent without mentioning changes required under the health law (PL 111-148, PL 111-152).

Sebelius added that subsidies are available to help cover premium charges and that cheaper catastrophic coverage policies will also be available to the young.

But the rate issue came up in other ways during the day, including whether members of lawmakers' personal staff would be exempted from a health law requirement that members of Congress get their coverage starting this fall through insurance exchanges.

Sebelius sidestepped a question on her way into the hearing about whether Hill staff should be exempted. "I haven't been directly involved in this," Sebelius said.

White House spokesman Eric Schultz said members of Congress would continue to be required to buy insurance through the exchanges—but did not respond to a question about what would happen to staff members.

"Members of Congress will not receive anything that is not available to the public. The law doesn't allow them to get insurance from FEHB, they are going to get insurance on the market place, just like individuals uninsured and small businesses," he said in a statement, referring to the Federal Employees Health Benefits Plan.

Meanwhile, the top Republican on the Senate Finance Committee sent a letter to Sebelius last week asking why the administration had permitted Massachusetts a three-year phase in period to apply certain rating factors when it had not done so in the case of other states.

Sen. Orrin G. Hatch of Utah said "it seems only reasonable ... that the Department has the same authority to offer flexibility to all states, regardless of whether or not the states had an established exchange prior to January 1, 2010" as did Massachusetts, he said.

The insurance industry has requested such transition periods, saying they would lessen premium hikes under the health law. HHS officials did not respond to a request for comment.

By John Reichard, CQ HealthBeat Editor

April 24, 2013 -- Pioneer ACOs can fairly be described as being at the leading edge of national efforts to control health spending, but it also can be the bleeding edge, as one ACO insider wryly notes.

That's because these pace-setting organizations are experimenting with team-based care try to reduce their spending—and lately perhaps because of upcoming quality standards they say are too demanding and costly to meet.

A recent letter released by the Centers for Medicare and Medicaid Services (CMS) aims to respond to those concerns, which led all 32 of the organizations to say in a Feb. 25 letter to CMS that they might quit the program.

That would deal a major blow to Obama administration efforts to rein in health spending. The pioneers are thought to be the most advanced providers in coordinating treatment in the fee-for-service system, which still by far accounts for most of the spending in Medicare despite the growing chorus of policy analysts who say it should be replaced.

It's unclear how pioneer accountable care organizations, or ACOs, will respond to the new CMS letter, which also makes clear that the agency intends to hold these more advanced accountable care organizations to higher quality standards than the 200-plus ACOs that are part of the CMS "shared savings" program.

ACOs are affiliations of different types of providers who coordinate treatment services to improve the quality and efficiency of care. Insurers set standards for savings and quality performance which, if met, allows participating providers to receive bonus payments or in some contracts to avoid having payments docked if they fall short.

The Centers for Medicare and Medicaid Innovation at CMS, established under the health law (PL 111-148, PL 111-152), has contracted with 32 ACOs to be "pioneers." The separate shared savings program at CMS involves contracts with other ACOs that, in general, have less experience in care coordination.

ACOs attempt to end the go-your-own-way approach to medicine characteristic of doctors and hospitals in the fee-for-service system in Medicare and commercial insurance.

While the April 23 CMS letter shows flexibility, it's too soon to say whether all of the 32 will stick with the pioneer ACO program. They have until the end of May to decide.

The April 23 reply from CMS suggests that rather than having to comply with "flat percentage" quality benchmarks that caused alarm among the pioneer ACOs, the organizations will be expected to meet quality standards based on the real-world experience of providers.

Those standards address things like provider performance managing the blood pressure of Medicare enrollees or finding out from them if they smoke and are taking steps to quit.

The pioneers said the flat percentages set for things like the percentage of patients screened for colorectal and breast cancer were far higher than "best in class" providers had previously been able to attain and should be more closely tied to the real-world performance of providers thus far.

Richard Gilfillan, director of the innovation center, said in the letter that more recently CMS has received data from 200 organizations allowing "empirical" benchmarks to be used in 2013. The organizations include both pioneer and shared savings ACOs. In other words, the standards would be based more on actual past ACO performance.

An ACO insider said that the pioneer group is, in effect, going to be measured against their own past performance this year to see whether the quality of their care is improving. That's probably better than standards that are impossibly high, but it may not assuage top performers for whom it is difficult to show improvement, the insider said.

CMS said in a statement that "we are not going to delay holding ACOs accountable for these quality measures, but we will speed up the collection and application of data to these important quality metrics to ensure that they are as accurate as possible."